A total of 5,000 people live In the town of Scholaria. There are 1,000 high scho

Question

A total of 5,000 people live In the town of Scholaria. There are 1,000 high school students, 1,000 undergraduate students, 1,000 graduate students, 1,000 economics professors, and 1,000 retired economists. Suppose that the total annual Income in the economy is $100 million: Each high school student makes $6,000 annually; each undergraduate makes $10, 000 annually; each graduate student makes $25,000 annually; each professor makes $55,000 annually; and each retiree makes $4,000 annually. The following chart shows the income distribution for the town of Scholaria. Suppose that the government sets the poverty threshold at an annual Income of $5,000. The poverty rate In Scholaria is______. Which of the following sequences correctly orders the people of Scholaria from the bottom fifth to the top fifth of income distribution? Retirees, high school students, undergraduates, graduate students, professors Graduate students, professors, high school students, undergraduates, retirees Retirees, graduate students, undergraduates, high school students, professors High school students, retirees, graduate students, professors, undergraduates Given your previous answers, the income distribution in Scholaria_______show income inequality.

Explanation / Answer

Each retiree earns $4,000 annually. This earning is below the poverty-line income $5,000. There are 1,000 retirees out of total 5,000 people.

Poverty rate = {(Number of retirees) / (Total number of people)} × 100

                     = (1,000 / 5,000) × 100

                     = 20% (Answer)

The correct sequence would be based on the vertical heights of earnings of different group of people on bar chart and it is as below:

Retirees, high school students, undergraduates, graduate students, professors

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