Deck 19: Earnings and Discrimination

Question 1

The statement that "the rich get richer, and the poor get poorer" is supported by evidence of an expanding wage gap between high-skill and low-skill workers.

Answer 1

True

Question 2

A computer is an example of human capital.

Answer 2

False

Question 3

Compensating differentials are differences in wages related to the characteristics of a job.

Answer 3

True

Question 4

The economic theory of labor markets suggests that wages are determined by labor supply and labor demand.

Question 5

As a result of an increase in the earnings gap between skilled and unskilled jobs, the incentive to get a college education has been declining.

Question 6

Higher levels of human capital are correlated with higher earnings because firms are willing to pay more for better-educated workers who have higher marginal productivities.

Question 7

Daryn earns a higher salary than his friend Nick because Daryn is willing to work on the loading dock, whereas Nick prefers to work in an air-conditioned office. The difference in salary could illustrate a compensating differential.

Question 8

It is increasingly clear that technological change is the only explanation for an expanding wage gap between high-skill and low-skill workers.

Question 9

John has financial assets totaling $1.5 million, and he plans to use these assets to start his own business. Since John owns these funds and will not need to borrow to start his business, these assets are considered human capital.

Question 10

Over the past 30 years, the number of jobs in the United States requiring skilled labor has been declining as foreign countries steal these jobs away from the U.S. As a result, the domestic demand for skilled labor has been falling and the wage gap between skilled and unskilled labor has been narrowing.

Question 11

The changing gap in wages between unskilled and skilled workers is most likely related to a larger increase in demand for unskilled occupations relative to skilled occupations.

Question 12

One hypothesis to explain the changing gap in wages between unskilled and skilled workers in the United States is that international trade has altered the relative demands for skilled and unskilled workers.

Question 13

The fact that doctors are paid more than economics professors is an example of a compensating differential.

Question 14

A compensating differential refers to a difference in wages that arises from nonmonetary characteristics.

Question 15

Some economists suggest that increased international trade with countries that have a greater proportion of unskilled workers has led to an expanding wage gap between high-skill and low-skill workers in the United States.

Question 16

A compensating differential is a difference in wages due to higher levels of education or other forms of human capital.

Question 17

The human-capital theory of education maintains that workers who complete specific levels of education enhance their productivity through education.

Question 18

Traci is a nurse, and she gets paid an additional $1.00 per hour for agreeing to work the night shift. Carol is also a nurse, but she works the day shift and does not get paid this extra dollar per hour. This difference in pay is an example of a compensating differential.

Question 19

Education and on-the-job training are sources of human capital.

Question 20

Human capital refers to the physical tools and equipment that workers use on their jobs to enhance their productivity.

Question 21

Labor-market discrimination based solely on age is illegal in the United States.

Question 22

An effective minimum wage law will increase the quantity of labor demanded.

Question 23

The signaling theory of education maintains that workers who complete specific levels of education enhance their productivity through education.

Question 24

A manager of a small firm who believes in the signaling theory of education would encourage her employees to obtain additional education to raise their on-the-job productivity.

Question 25

Daryn and Nick work for two different companies, but each performs the same job working on a loading dock. Daryn, however, earns a higher salary than his friend Nick The difference in salary could illustrate union wages if Daryn's annual salary is covered by a collective bargaining agreement and Nick's is not.

Question 26

Superstars earn high incomes due to their ability to satisfy the demands of millions of people at once.

Question 27

Efficiency wages will raise the quantity of labor supplied to the market.

Question 28

It is likely that efficiency wages will decrease employee effort.

Question 29

Discrimination is an emotionally charged issue that is impossible to study objectively.

Question 30

The superstar phenomenon explains why professional athletes earn more than amateur athletes.

Question 31

One reason why better-looking workers may have higher earnings is that physical attractiveness may enhance a worker's productivity for certain jobs, especially for those workers who deal with the public.

Question 32

Empirical evidence suggests that ability, effort, and chance are not likely to be significant contributors to wage differences.

Question 33

Labor unions will raise the quantity of labor demanded.

Question 34

Since measurable factors such as years of experience and years of education explain less than half of the variation in wages, ability, effort, and chance must play a significant role in determining wages.

Question 35

The signaling theory of education maintains that workers who complete specific levels of education signal their high productivity to potential employers.

Question 36

Sometimes workers earn higher wages through chance.

Question 37

Discrimination is a reflection of some people's prejudice against certain groups in society.

Question 38

The signaling theory of education suggests that when people earn a college degree they do not become more productive, but they do signal their high ability to prospective employers.

Question 39

Efficiency wages may decrease employee turnover.

Question 40

One reason why better-looking workers may have higher earnings is that physical attractiveness is correlated with intelligence.

Question 41

Differences in human capital among workers can often be attributed to social or political processes rather than economic processes.

Question 42

If an older worker earns less than a younger worker for the same job, we have proof of age discrimination.

Question 43

Evidence of discrimination is most apparent when one compares wages among broad groups.

Question 44

In a labor market free from discrimination, wages for workers that are employed by the same company will still differ.

Question 45

When discrimination occurs as a result of employer prejudice, discriminating firms do not maximize profits.

Question 46

It is illegal in the United States for firms to pay different employees different wages for doing the same job.

Question 47

One example of labor-market discrimination is that firms may be less likely to interview job-market candidates whose names suggest that they are members of a racial minority.

Question 48

When comparing average wages for black and white men in the United States, wages paid to black men have been about 20 percent less than those paid to white men.

Question 49

Experimental evidence indicates women choose less competitive environments than men.

Question 50

According to economic historians, streetcars in southern cities in the early 1900s were racially segregated because the owners of the firms believed that segregation raised the firms' profits.

Question 51

When comparing average wages for male and female workers in the United States, wages paid to females have been about 40 percent less than those paid to male workers.

Question 52

Discrimination is usually not a profit-maximizing strategy.

Question 53

Profit-maximizing, competitive firms will not discriminate in the hiring of workers unless consumers exercise a preference for discrimination in product markets or governments mandate discrimination.

Question 54

A study using data from the late 1960s showed that black baseball players earned less than comparable white players. Studies of more recent salaries in baseball, however, have found no evidence of discriminatory wage differentials.

Question 55

Economists would argue that the gender wage gap is narrowing because of efficiency wages.

Question 56

Streetcar owners in the early 20th century were against segregation for profit maximizing reasons.

Question 57

Politicians often point to wage differentials as evidence of labor-market discrimination against ethnic minorities and women; however, economists argue against this approach because people differ in the amount of human capital they have and the kinds of work they are willing and able to do.

Question 58

All differences in wages that are not accounted for by differences in human-capital investment are likely to be a result of discrimination.

Question 59

Differences in human capital among groups of workers is possibly a reflection of past discrimination.

Question 60

If people with blue eyes earn more than people with brown eyes, we have proof of discrimination against people with brown eyes.

Question 61

Which of the following represents an example of labor-market discrimination?

A)An employer is more likely to grant an interview to a person graduating from Yale than from the local community college.
B)An employer is more likely to grant an interview to a person graduating from the local community college than from Yale.
C)An employer is more likely to grant an interview to a woman with a traditionally "white" name such as Emily than to a woman with a traditionally "black" name such as Lakisha.
D)An employer is as likely to grant an interview to person with a traditionally "masculine" name such as "Alex" as a person with a traditionally "feminine" name such as "Emily."

Question 62

Which of the following statements is correct?

A)Differences in human capital may explain differences in wages between blacks and whites.
B)Racial discrimination is the strongest explanation for differences in wages between blacks and whites.
C)Gender discrimination is the strongest explanation for differences in wages between blacks and whites.
D)None of the above statements is correct.

Question 63

Offering different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics is called

A)a compensating differential.
B)an efficiency wage.
C)discrimination.
D)compensating variation.

Question 64

According to evidence provided by the U.S. government, the median black

A)woman is paid roughly the same as the median white woman.
B)woman is paid roughly the same as the median black man.
C)man is paid 21 percent less than the median white man.
D)All of the above are correct.

Question 65

Customer discrimination is illegal in the United States.

Question 66

Workers in a labor union typically are paid less than workers not in a labor union.

Question 67

According to evidence provided by the U.S. government, the median black

A)man earns more than the median black woman.
B)woman earns less than the median white woman
C)man earns less than the median white man.
D)All of the above are correct.

Question 68

Labor-market discrimination is evident when

A)wages of individuals differ on the basis of some recognizable attribute that is unrelated to productivity.
B)wage rates differ for similar jobs.
C)consumers prefer to shop at some stores, and not at others.
D)wages reflect workers' human capital.

Question 69

The differences in the desirability of different jobs within a company could give rise to a compensating differential between workers.

Question 70

Gerald earns a higher salary than his brother Peter because Gerald went to law school and is a lawyer, whereas Peter dropped out of college to work as a mechanic. The difference in salary illustrates a compensating differential.

Question 71

Jen is a waitress, and she gets paid an additional $2.00 per hour for agreeing to work on Valentine's Day. Jamie is also a waitress, but she did not work on Valentine's Day and hence did not get the extra $2.00 per hour. This difference in pay is an example of differences in human capital.

Question 72

Consumers are often a primary source of discrimination in labor markets.

Question 73

Which of the following statements does not accurately describe the market for labor?

A)The characteristics of workers, such as their education and experience, the characteristics of jobs, such as their pleasantness or unpleasantness, and the presence or absence of discrimination by employers all determine equilibrium wages.
B)Labor unions, minimum wage laws, and efficiency wages all may increase wages above their equilibrium level.
C)Firms are willing to pay more for better-educated workers as long as there is an excess supply of this type of worker.
D)Discrimination by employers against a group of workers may artificially lower wages for that group.

Question 74

By definition, there is discrimination when the marketplace offers different opportunities to similar individuals who differ only by

A)race, ethnic group, sex, age, or other personal characteristics.
B)qualifications, experience, or job preferences.
C)levels of human capital.
D)All of the above are correct.

Question 75

Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by

A)race.
B)level of education.
C)attitudes toward risk.
D)All of the above are forms of discrimination.

Question 76

One example of labor-market discrimination is that a firm may be less likely to interview a job candidate whose resume clearly indicates he is not a good fit for the job.

Question 77

Which of the following can be used to help explain wage differences among different groups of workers?

A)human capital acquired through education
B)human capital acquired through job experience
C)compensating differentials
D)All of the above can explain wage differences.

Question 78

Given that the median male is better paid than the median female, which of the following is a valid explanation for wage differences?

A)compensating differentials
B)differences in human capital
C)discrimination
D)All of the above can be a partial explanation.

Question 79

Which of the following is an example of discrimination in the labor market?

A)Women earn less than men because women are more likely to be employed in occupations that pay less, such as elementary school teachers rather than electrical engineers.
B)Women earn less than men because women have, on average, fewer years of experience in the labor force because women, on average, periodically leave the labor force to raise children.
C)A pharmaceutical sales company pays women less than men because the company's customers, physicians and pharmacists, say that they prefer to deal with men rather than women.
D)All of the above are examples of discrimination.

Question 80

Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by

A)age.
B)years of experience.
C)years of education.
D)All of the above are forms of discrimination.