What are the reasons for unequal distribution of income? List at least six reasons
The text lists the following eight reasons:
1 . There may be differences in ability. Intellectual and entrepreneurial abilities may differ.
2 . There may be differences in intensity of work. Some persons prefer to work; others prefer more leisure. This accounts for voluntary differences in income.
3 . Some persons take risks and win; others take risks and lose; and some take no risks at all, ending up in the middle. This may also be a source of voluntary differences in income.
4 . There are compensating differentials for jobs that are perceived as dangerous or otherwise unpleasant. The differential is necessary to draw in labor and make up for the unattractive features of the job.
5 . There are differences in schooling and training. To the extent that human capital theory is descriptively accurate, the differences will result in differences in income.
6 . Work experience varies, and older workers tend to earn higher incomes than younger workers.
7 . There are differences in inherited wealth-financial and human capital-that can lead to differences in income.
8 . Finally, luck plays a role. Examples include prospectors who strike oil and farmers who are plagued by drought.
You might also like to view...
Suppose the production function for coffee (C) is C = min(B,W), where B = beans in pounds and W = water in gallons. Suppose the price of water is $.10 per gallon and the price of beans is $10 per pound. The cost minimizing combination of beans and water for C = 200 is
a. B = 200, W = 2000 b. B = 2000, W = 200 c. B = 100, W = 100 d. B = 200, W = 200
The marginal cost of a dollar of loanable funds is not
a. the interest rate b. the same as the marginal physical product of capital c. a measure of the marginal cost of capital d. equal to the marginal revenue product of capital at the firm's profit-maximizing quantity of loanable funds e. the change in a firm's total cost that results from adding one more dollar of loanable funds to production
A firm that is earning zero economic profit should go out of business
a. True b. False Indicate whether the statement is true or false
One solution to long-run structural problems could involve:
A. moving along the domestic supply curve. B. shifting the domestic supply curve up. C. shifting the world supply curve up. D. shifting the world supply curve down.