high-income workers like salespeople and managers, but a substitute for low-income workers like file

clerks and telephone receptionists.

9. Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage

labor market, explain how a program that increased educational levels for a substantial number of low-

skill workers could reduce income inequality.

10. Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce

economic output. Explain why this might be so, and sketch a production possibility curve that shows this

tradeoff.

11. Here is a second hypothesis: A well-funded social safety net may lead to less regulation of the market

economy. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.

12. Which set of policies is more likely to cause a tradeoff between economic output and equality: policies of
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