Which statement about poverty is true?

• A. Poverty only exists in developing countries.
• B. Relative poverty refers to having less income than the global average.
• C. Absolute poverty is defined as living below a fixed minimum income threshold necessary for basic needs.
• D. Government intervention always eliminates poverty completely.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of poverty in microeconomics, which generally distinguishes between absolute poverty and relative poverty.
2. Step 2: Define absolute poverty as a condition where individuals live below a fixed minimum income threshold necessary to meet basic needs such as food, shelter, and clothing. This threshold is constant and does not change with societal income levels.
3. Step 3: Define relative poverty as a condition where individuals have significantly less income compared to others in their society, often measured as a percentage of median or average income within a country, not the global average.
4. Step 4: Evaluate the statements given: recognize that poverty is not limited to developing countries, and government intervention, while helpful, does not always completely eliminate poverty.
5. Step 5: Conclude that the true statement is the one correctly defining absolute poverty as living below a fixed minimum income threshold necessary for basic needs.