AP Microeconomics : Lorenz Curve and World Trade Quiz

A measure of income inequality is the Lorenz Curve. The Lorenz Curve measures the distance from the line of perfect equality. The farther the distance the Lorenz Curve dips away from the 45 degree line, the more unequal income is divided. The Gini Coefficient measures the amount of inequality and is calculated by taking the area above the Lorenz Curve and dividing it by the area under the curve. World trade looks at how the rest of the world trades with the United States. Usually, the rest of the world is at a comparative advantage and the world price is lower. Because the world price is lower, politicians argue for tariffs and quotas. The politician's arguments range from infant-industry to national security, to saving domestic jobs. Effective preparation for the AP Micro exam requires the student to analyze how the tariff distorts distribution of resources.