Question 1

As Table 17-2 (see below) shows, members of the poorest fifth of U.S. households have a

much smaller share of total U.S. income than is typical in other developed countries. Does

this mean that the poorest fifth of U.S. households are worse off in the United States than are the poorest fifth of households elsewhere? Why or why not?

Question 2

The U.S. federal government (same as Australian) definition of poverty is the same in all communities around the country. Is this appropriate? Why or why not?

Question 3

Suppose there are two types of people in the country of Diplandia: people who value only

food, and people who value both food and movie tickets. The government of Diplandia is

considering moving from a cash-welfare system to a food stamps system. The new system

will provide the same benefit levels, but recipients will get stamps allowing them to buy food instead of cash. Explain how this change will affect the work efforts and utility levels of the   two types of people in Diplandia. How do you think the change would affect the overall Diplandia economy?

Question 4

Suppose that the government currently provides everyone with a guaranteed income of

$12,000 per year, but this benefit level is reduced by $1 for each $1 of work income. The   government is considering changing this policy such that the benefit level is reduced by $1 for every $2 of work income. What effect would this policy have on work effort? Explain   your answer.