Chapter 30: Q.c - For Critical Thinking (page 684)
Who provides the more than $100 billion that Medicare spends on prescription drugs each year?
The taxpayers provide the money.
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Why do you suppose that choosing other increments besides \(15,000 or \)30,000 can yield even more distributional variations of households within these seven income groupings?
(Hint: what do you think could happen if one were to broaden the income increments to \(100,000 or narrow them to \)5,000 while holding the number of income groups equal to seven?)
Consider the graph nearby, which depicts Lorenz curves for countries X, Y, and Z.
a. Which country has the least income inequality?
b. Which country has the most income inequality?
c. Countries Y and Z are identical in all but one respect: population distribution. The share of the population made up of children below working age is much higher in country Z. Recently, however, birthrates have declined in country Z and risen in country Y. Assuming that the countries remain identical in all other respects, would you expect that in 20 years the Lorenz curves for the two countries will be closer together or farther apart? (Hint: According to the age-earnings cycle, what typically happens to income as an individual begins working and ages?)
Identify the key determinants of income differences across individuals and discuss theories of the desired income distribution.
Identify whether each of the following proposed poverty measures is an absolute or relative measure of poverty, and discuss whether poverty could ever be eliminated if that measure were utilized.
a. An inflation-adjusted annual income of \(25,000 for an urban family of four
b. Individuals with annual incomes among the lowest 15 percent
c. An inflation-adjusted annual income of \) 10,000 per person
Who do you think provides funds to cover emergency room expenses for an uninsured patient who pays an annual $250 health-law penalty but fails to pay the emergency room charges?
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