Question

The distribution of income for Dismal is as follows: Number of Families Income 1,000 less than $10,000 2,000 between $10,000 and $20,000 2,000 between $20,000 and $30,000 800 between $30,000 and $40,000 200 over $40,000 If the poverty rate in Dismal is 50 percent, what is the poverty line in Dismal? a. $10,000. b. $20,000. c. $30,000. d. $40,000.

Answer 1

Answer:

The correct answer is:

$20,000 (b.)

Explanation:

In order order to calculate the poverty line for Dismal, we will first of all calculate the total number of families in Dismal as follows:

from lowest to high income = 1,000 + 2,000 + 2,000 + 800 + 200 = 6,000

Next, we are told that the poverty rate = 50% = 0.05

Since the Total families = 6000

Therefore, number of poor families = 50% of 6,000 = 0.05 × 6000 = 3,000

Therefore 3,000 families are poor in Dismal

To determine the poverty line, we will count from the lowest earning families upwards until the 3,000th family. The highest income of the 3,000 families counted forms the poverty line. This is done as follows:

1,000 families = $10,000

2,000 families = $10,000 to $20,000

These two groups make up the first 3000 families, and the highest income in the group is $20,000.

Hence the poverty line of Dismal = $20,000