Deck 19: Earnings and Discrimination

Question 1

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.

Answer 1

False

Question 2

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 2

True

Question 3

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

Answer 3

True

Question 4

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 5

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

Question 6

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 7

A computer is an example of human capital.

Question 8

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 9

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

Question 10

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 11

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 12

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

Question 13

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

Question 14

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 15

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 16

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

Question 17

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 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

Sometimes workers earn higher wages through chance.

Question 24

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

Question 25

Labor unions will raise the quantity of labor demanded.

Question 26

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

Question 27

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 28

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 29

It is likely that efficiency wages will decrease employee effort.

Question 30

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

Question 31

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

Question 32

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 33

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

Question 34

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 35

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

Question 36

Efficiency wages may decrease employee turnover.

Question 37

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

Question 38

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

Question 39

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 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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 45

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

Question 46

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

Question 47

Experimental evidence indicates women choose less competitive environments than men.

Question 48

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

Question 49

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 50

Discrimination is usually not a profit-maximizing strategy.

Question 51

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

Question 52

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 53

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

Question 54

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 55

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 56

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

Question 57

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

Question 58

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 59

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

Question 60

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 61

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

Question 62

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 63

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 64

The most important type of human capital is

Question 65

Table 19-2 Source: US Census Bureau and Mankiw's calculations
Refer to Table 19-2. In 2011, on average how much more income would a man with a college degree earn than a man with a high school degree?

Question 66

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 67

Customer discrimination is illegal in the United States.

Question 68

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

Question 69

Lucy and Lincoln are salespeople working for the same company with equal skills, ability, and experience. Both are paid a small base salary but the majority of their compensation is in the form of a commission, which is a percentage of the sales they make. Lucy earns more each year than Lincoln. What can you conclude about Lucy and Lincoln?

Question 70

Why do college graduates earn more in wages than workers with only a high school diploma?

Question 71

About what proportion of the variation of wages across workers is explained by factors that can be measured? What are the other factors that explain wage differences but are difficult to measure?

Question 72

Table 19-2 Source: US Census Bureau and Mankiw's calculations
Refer to Table 19-2. What are two possible hypotheses to explain the changes in relative demand for high-skilled workers and low-skilled workers in recent years?

Question 73

Consider two groups of workers of equal skill level and experience: those who collect garbage and those who stuff envelopes with campaign fliers. Which group is likely to be paid more and why?

Question 74

According to a study of the "beauty premium," how do the wages of people with average looks compare to those of people considered less attractive than average?

Question 75

Workers who work the night shift at factories are paid more than similar workers who work the day shift due to a

Question 76

Table 19-2 Source: US Census Bureau and Mankiw's calculations
Refer to Table 19-2. What conclusion can you draw about the changes in the gaps in earnings between skilled and unskilled workers between 1975 and 2011?

Question 77

According to economists Hamermesh and Biddle, how much more do people who are deemed more attractive than average earn?

Question 78

The difference in wages that results from nonmonetary characteristics of different jobs is called the

Question 79

The accumulation of investments in people is called

Question 80

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