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Suppose that in country A the “bottom” 40% of the population receives 10% of the country’s income. The “top” 60% receives the remaining 90% of the country’s income. What is the Gini index in country A? Now suppose that in country B the bottom 20% of people receives 5% of the country’s income, and the top 20% of people receives 55% of the country’s income. What is the Gini index in country B? (a) Which country has greater inequality? Graph the Lorenz curves (connecting points using straight lines) and show your algebra. (b) Would your answer change if country A was ten times richer than country B (i.e., total income in country B equaled ten times the total income in country A)? Explain. (c) Some people argue that the difference between the maximum and minimum income (i.e., the range: ymax – ymin) in a given country would be a good measure of relative inequality. However, this principle violates one of the four principles of inequality we discussed in class. Which one? Why? Hint: consider four distinct incomes (y1 < y2 < y3 < y4) and a redistribution of income among the two middle incomes. 4 Principles discussed in class: 1. anonymity: names do not matter; y1 a > y2 b > y3 c same inequality as y1 c > y2 b > y3 a where incomes y1; y2; y3 unchanged but owner changed 2. population: cloning entire population =) same inequality, i.e., (ya; yb; yc ) same inequality as (ya; ya; yb; yb; yc ; yc ) 3. relative income: (ya; yb; yc ) same inequality as (lambda ya; lambda yb; lambda yc ) for all 4. Dalton(-Pigou) transfer rule: inequality must increase if ya greater than or equal to yb and b gives money to a
q1. suppose a firm in each of the two markets listed below were to increase its price by 30 percent. in which pair
Given C= 60+0.8(Y-T), I = 70, G=180, T=100, If Government wishes to increase equilibrium income by 100. What change in G would be required? What change in T would have the same effect? Please verity
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Outline reasons why the marginal revenue product differs between workers in different jobs.
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A firm currently uses 100 workers to produce 200 units of output per day. The daily wage (per worker) is $80, and the price of the firm's output is $50. The cost of other variable inputs is $600 per day. The firm’s fixed cost is 8,000. The marginal c..
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You are thinking about becoming a Paradise Coffee franchisee. Franchisees are offered a business specializing in producing an exclusive line of exotic coffee drinks (similar to Starbucks). What is the estimated explicit (accounting) cost of your prop..
What are some of the tools that countries use to restrict trade and why do countries impose them? Can you think of any real life examples? What is TPA? What's at stake with these aforementioned agreements? Do you think that trade restrictions will be..
An investor is considering the construction of a new marina on the Detroit river at a cost of $68m. M&O costs will average $80,000 per year for the first five years, and rise to $100,000 per year thereafter. A major overhaul costing $12m will be requ..
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