Deck 20: Earnings and Discrimination

Question 1

People who leave school with no qualifications typically have less human capital than those workers with university qualifications.

Answer 1

True

Question 2

A person will only invest in education if it leads to a higher wage.

Answer 2

False

Question 3

For any given level of output, unionisation leads to an increase in the value of the marginal product of labour.

Answer 3

False

Question 4

It is increasingly clear that technological change, rather than international trade, has been largely responsible for an expanding wage gap between high-skill and low-skill workers.

Question 5

Sales commissions encourage workers to put in more effort, which raises their marginal product.

Question 6

Wage differentials are often caused by differences in education, experience and the willingness to take on dangerous or unpleasant tasks by workers.

Question 7

A binding minimum wage law will decrease the quantity of labour demanded.

Question 8

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

Question 9

Labour unions will generally decrease the quantity of labour demanded.

Question 10

The signalling theory of education is similar to the signalling theory of advertising.

Question 11

Forestry worker wages are often higher than other low-skilled work because of the higher risks of injury or death.

Question 12

Workers with more human capital will always earn more than those with less human capital.

Question 13

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

Question 14

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

Question 15

Unions are analogous to monopolies insofar as that the only way to raise prices (wages) is to lower output (employment).

Question 16

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

Question 17

Given that workers differ in terms of ability and effort, firms are likely to pay people different wages even in the absence of discrimination.

Question 18

Efficiency wages are above-equilibrium wages paid by firms to encourage productivity and decrease worker turnover.

Question 19

When discrimination occurs as a result of prejudice, market solutions will not provide motive to end discrimination.

Question 20

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

Question 21

Research engineers at GE (General Electric) cannot publish their results nor claim credit for any discoveries they makes. Suppose GE has a change of policy and now allows their employees to publish academic articles and claim credit for their findings. This will lead to a shift in:

A) the demand for labour curve up
B) the demand for labour curve down
C) the supply of labour curve left
D) the supply of labour curve right

Question 22

The 'beauty premium' can be explained by the fact that in some occupations, physical attractiveness of a worker may enhance the value of their marginal product.

Question 23

Wages never deviate from the balance of supply and demand in the market for labour.

Question 24

The basic neoclassical theory of the labour market predicts that:

A) wages are determined entirely by market supply
B) workers are compensated according to their contribution to the social value of society
C) workers earn a wage equal to the value they contribute to the economy
D) wages are determined entirely by firms that demand labour services

Question 25

If an employer believes that men are more likely to have a partner at home than women, they would be less risky to hire.

Question 26

The compensating differential refers to:

A) the difference in compensation (salary) that various jobs pay
B) the pecuniary difference between jobs
C) the difference in wages that arise from the non-monetary characteristics of different jobs
D) the fact the dangerous jobs will always pay more than non-dangerous jobs

Question 27

The fact that workers receive different wages is likely caused by:

A) government regulation that restricts the free movement of wages
B) the fact that some firms make more money than others
C) conditions of supply and demand in different labour markets
D) stronger unions in some industries

Question 28

Employers may discriminate because of asymmetric information about the quality of workers.

Question 29

When the supply of workers is scarce, one would predict that market wages would be:

A) determined solely by factors that affect demand
B) determined outside the domain of the neoclassical theory
C) high, other things being equal
D) low, other things being equal

Question 30

The theory of efficiency wages explains above-equilibrium wages by assuming that workers get a rise in wage when they prove they are increasing their productivity.

Question 31

Human capital is:

A) the stock of machines, equipment, and land that is used in production of other goods
B) the stock of capital in the economy in the possession of humans
C) the ratio of labour to capital in the economy
D) the accumulation of investments in people

Question 32

If education is a signalling device for high ability, employers will offer higher wages to educated workers.

Question 33

Which of the following is an example of compensating differentials affecting wages?

A) a lawyer receiving a higher wage than a cleaner as the supply of lawyers is less than the supply of cleaners
B) a highly educated civil engineer receiving a higher wage than his peers as she has a higher value of marginal product of labour
C) a doctor foregoing $100 000 in income to volunteer in a developing country
D) workers who work nightshift being paid the same as workers who work during the day

Question 34

Profit-maximising competitive firms cannot discriminate in the hiring of workers unless consumers exercise a preference for discrimination in product markets.

Question 35

Wage compensation is likely to be a function of which of the following?

A) the job requirements
B) the characteristics of workers
C) non-monetary attributes of the job undertaken
D) all of the above

Question 36

Even when the labour market was efficient, wage differentials could still occur.

Question 37

Human capital raises the wages of individuals because:

A) it raises the value of the marginal product of labour
B) highly educated workers need to be compensated for the costs of their education
C) highly educated workers are more deserving than those with low education
D) it raises the marginal revenue of production, leading to higher prices and wages

Question 38

Given a community worker for the Red Cross gets paid less money than a professional soccer player, this means that:

A) a soccer player is valued more by society than a community worker
B) labour markets are generally inefficient and inequitable
C) a soccer player generates more revenue in the economy than a community worker
D) none of the above are true

Question 39

When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:

A) market discrimination.
B) a difference in the value of marginal product of labour
C) that wages will converge over time
D) that wage differences reflect social status

Question 40

Superstars are able to earn very high incomes. Superstars arise in markets where customers want to enjoy the good supplied by the best producer, and the good can be supplied to many customers at a low cost.

Question 41

The statement that 'night shift workers make a higher wage than day shift workers' is likely to reflect:

A) a general worker preference for day shift jobs
B) the fact that some people just prefer to work a night shift for non-monetary reasons
C) the fact that night shift jobs are generally more technically difficult
D) the fact that women work the night shift more than men

Question 42

Doppelsöldners were sixteenth century German soldiers that received double pay for fighting in the front of their unit. The likely difference in wages was caused by:

A) doppelsöldners having more expensive uniforms
B) an archaic custom with no market explanation
C) doppelsöldners belonged to a union and other soldiers did not
D) doppelsöldners having a more dangerous job than other soldiers

Question 43

On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:

A) if the summer camp job doesn't require any special skills, the wage offer is likely to be lower than otherwise
B) the lifeguard job is likely to be more fun than the summer camp job, so its wage is likely to be higher
C) the summer camp job requires some night shift work, so wages are likely to be lower
D) all of the above are true

Question 44

The statement, 'coal miners are paid more than workers with similar levels of education', is likely to reflect the fact that:

A) coal mining is a declining industry
B) coal exports are rising
C) coal mining jobs are potentially more dangerous than jobs with comparable education requirements
D) all coal mines use union labour

Question 45

On the basis of knowledge obtained in his economics class, Ferris is likely to conclude that:

A) if the motel job also requires an ability to do general plumbing repairs, the wage offer will be low
B) wages are unlikely to be affected by job requirements
C) if the food distribution job has a requirement for special training or certification, this would tend to increase the wage offer
D) since the food distribution job would expose him to the Ebola virus, the wage is likely to be low

Question 46

An increase in the human capital of workers is:

A) likely to decrease their value of marginal product
B) likely to increase their value of marginal product
C) not likely to change their value of marginal product
D) a waste of resources for most jobs

Question 47

The ownership of human capital:

A) is not generally transferable
B) is easily transferable to multiple individuals
C) is typically embodied in related physical capital
D) may be subject to government restrictions on transferability

Question 48

The return to investment in human capital is observed:

A) in the wage differential between workers
B) only when workers are assigned identical tasks
C) in the low wages of educated factory workers
D) in the high-school dropout rate in inner city urban school districts

Question 49

A compensating differential means that:

A) a wage difference arises from different marginal productivities of labour
B) workers that do similar work should be paid the same wage
C) a wage difference arises from non-monetary characteristics of different jobs
D) all of the above

Question 50

The wage difference between jobs that require education and those that don't:

A) is not likely to be related to productivity differences
B) encourages workers to bear the cost of acquiring education
C) is a barrier to obtaining an education
D) does not affect the supply of workers in the different labour markets

Question 51

When workers who work the night shift are paid more than those who do identical work on the day shift, this is referred to as:

A) wage inequity
B) inefficient markets
C) a compensating differential
D) discriminatory wage practice

Question 52

Professional underwater divers are known to have high wages and work an average of only 20 hours a week. The high wages are partly explained by the fact that the job:

A) does not require a university degree
B) is likely to be very dangerous
C) is likely to be very dull
D) is likely to be fun

Question 53

On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:

A) if the lifeguard job also requires a willingness to clean public restrooms, the wage offer will be lower than otherwise
B) if the lifeguard job has a requirement for special training or certification, this would tend to increase the wage offer
C) wages are unlikely to be affected by job requirements
D) since the lifeguard job would expose him to skin cancer, the wage is likely to be low

Question 54

The wage differential between educated workers and uneducated workers in developing economies is typically:

A) unrelated to marginal productivity
B) larger than that which exists in developed economies
C) smaller than that which exists in developed economies
D) difficult to measure

Question 55

The statement that 'public school teachers are paid less than engineers, but have similar amounts of education', is likely to reflect market conditions such that:

A) engineering classes at the university are universally more difficult than education classes at the university
B) engineers have higher intrinsic job satisfaction than public school teachers
C) wage discrimination is more likely in markets for public school teachers
D) public school teachers must receive a compensating wage differential

Question 56

Sarah, a university student, is trying to consider what she should do for summer employment. Two recruiters show up at her university in search of summer workers. Recruiter A is looking for lifeguards to patrol the beach. Recruiter B is looking for workers to staff positions at a summer youth camp.
On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:

A) the large pool of applicants for the lifeguard job will likely lead to a high wage
B) the small pool of applicants for the summer camp job will likely lead to a high wage
C) the lifeguard job is likely to be more fun than the summer camp job
D) all of the above are true

Question 57

Technology is an important factor in explaining the high incomes of superstars because:

A) technology is available which can limit access to the superstars
B) only technologically literate superstars can earn super incomes
C) technology accounts for differences in incomes within all occupations
D) technology makes it possible for the best producer to supply every customer at low cost

Question 58

Both Lee and John have got a business degree from a university. They both got jobs as research analysts in the same firm. Two years later Lee is earning more money than John. This wage difference is likely caused by:

A) discrimination by the firm
B) differences in work experience
C) regulations in the labour market
D) compensating differentials

Question 59

Library assistants are known to have low wages. This is likely to be partly explained by the fact that:

A) library assistants jobs are widely considered to be difficult
B) library assistants jobs are perceived to be relatively easy
C) libraries are hazardous locations with elevated accident risks
D) library assistants are required to have a university degree

Question 60

A plumber who specialises in cleaning plugged sewer lines is typically paid a higher wage than a plumber who works on installing water systems in new residential housing. This is likely to be partly explained by the fact that:

A) plumbing jobs involving sewer lines are likely to have an element of personal satisfaction
B) plumbers who work with sewer lines are more likely to work a standard shift
C) a plumber who works with clogged sewer lines is likely to be perceived as doing a 'dirty' job
D) plumbers who work with clogged sewer lines require years of specialised training

Question 61

Professional cricket players have very large differences in the salaries that is best explained by:

A) chance
B) the team the player is contracted to
C) natural ability
D) the number of sports cars the player owns

Question 62

Hypotheses described in the text, and that have been proposed to explain the rising wage gap between skilled and unskilled workers:

A) may be reasonable explanations for a country whose technology and participation in world markets have remained constant over the relevant time period
B) may be complementary to one another
C) must be mutually exclusive
D) are, in fact, the only possible explanations for the observed wage gap

Question 63

Economists who study labour markets have discovered that:

A) only about five per cent of wage differences are related to chance
B) ability, effort and chance are likely to be significant contributors to wage differences
C) ability is not difficult to measure, but is largely insignificant in explaining wage differences
D) work effort is difficult to measure, but is not likely to contribute much to an explanation of wage differences

Question 64

Even when university education in Australia was free, not everyone got a degree. Which of the following is one possible reason for why some people would get degrees while others would not?

A) although free in a monetary sense getting a degree takes time and effort, the cost of which will be lower for high-skilled people than low-skilled people
B) the human capital effects of university have been shown to be small, corresponding to only small increases in wages
C) the benefits of education are likely to be higher for low-ability people than for high-ability, and so high-ability would not find it profitable to attend university
D) none of the above

Question 65

The alternative to human capital theory that explains why people invest in education argues that:

A) schooling just acts as a signal of future ability
B) university is a place to network with future workers
C) productivity is not linked to wages
D) people cannot be considered as 'capital'

Question 66

Empirical analysis of wage differences have found evidence:

A) that suggests that physical appearance-related wage differentials among males are vastly different to such differentials among females
B) of direct correlation between wages and attractiveness
C) of a minor role played by omitted variables
D) that the physical appearance of people in identical jobs is not likely to impact their wages

Question 67

The high incomes for superstars in the movie market can be attributed to the fact that:

A) there are not many good substitutes for the product offered
B) people who become superstars have the best publicists
C) superstars are very lucky individuals
D) there are a lot less good movies being made at the moment

Question 68

Evidence suggests that the cause of increased wages from obtaining a university education:

A) is mostly due to increases in human capital
B) is mostly due to the signalling value of a degree
C) is mostly due to scarcity effects
D) is inconclusive: it is an open question as to the relative size of the human capital and signalling effects

Question 69

Business firms that pay salespeople a percentage of the sales they make are attempting to reward:

A) comparable worth
B) years of experience
C) years of schooling
D) work effort

Question 70

The 'beauty premium' can be explained by the fact that:

A) beauty acts as an implicit signal of innate intelligence
B) beautiful people are likely to reflect 'good breeding'
C) marginal productivity in all occupations has a physical dimension
D) in some occupations, physical attractiveness of a worker may enhance the value of their marginal product

Question 71

When computers are used to replace workers on a factory production line, the wage gap:

A) between skilled and unskilled workers is likely to fall
B) will rise only if the company can increase the price of its product
C) between skilled workers and unskilled workers is likely to increase
D) between skilled workers and unskilled workers will not change

Question 72

Suppose an individual who left school at 16 earns more than a surgeon with 10 years of tertiary education. Such an outcome suggests:

A) that there is some kind of market failure
B) human capital does not have high returns
C) that chance and natural ability can be just as important as human capital in determining wages
D) the early school lever must have a high level of job satisfaction

Question 73

Suppose a forestry firm increases its investment in new technology for its sawmills. The firm employs both skilled and unskilled workers. After this new investment the wage gap between skilled and unskilled workers:

A) is likely to be unaltered
B) is likely to fall
C) will rise only if marginal productivity of unskilled workers is not altered
D) is likely to rise

Question 74

Studies that try to measure the factors that explain wage differences have shown that:

A) influences on wage differences are found to be quite small
B) few factors are not explicitly measurable
C) measurable factors explain less than half of the variation in wages
D) effort and ability are not likely to contribute to large differences in wages

Question 75

Under the 'signalling view' of education, obtaining a university degree communicates valuable information to employers because:

A) it is easier for high-ability people to get a degree than low ability people, so more high-ability people get degrees
B) the high cost of education signals the employee's desire and commitment to an industry
C) the high level of work needed to obtain a university education is a signal of effort
D) the skills and knowledge leant at university increases an employee's marginal product

Question 76

Empirical evidence based on analysis of education attainment suggests that:

A) innate ability is the most important determinant of wages
B) students in states with compulsory schooling laws did not have higher wages than those in other states
C) almost all wages can be explained by factors linked to the signalling theory
D) education does increase the marginal productivity of workers

Question 77

Suppose John was very skilled at developing film into photos. John however, lacks the skills to process digital photos because he knows little about computers. Most amateur photographers now use digital cameras. This means it is very likely that John's wage will fall because of:

A) his natural ability
B) the poor geographic location of his employment
C) his poor work effort
D) a chance event that is making his skills obsolete

Question 78

Up until the late 1980's, the ratio of earnings of university graduates to the earnings of those who left after secondary school declined. However, during this period equilibrium quantity of employed university graduates also increased. What could explain this outcome?

A) demand for university graduates fell while the number of people graduating was stable
B) demand for university graduates rose while the number of people graduating was stable
C) supply of university graduates fell while the number of people graduating was stable
D) both the supply and demand for university graduates rose

Question 79

If empirical tests of the human capital theory find conclusive evidence that education enhances productivity, then optimal public policy would suggest that:

A) everyone should be required to finish high school
B) compulsory schooling laws always increase social wellbeing
C) the benefits of increased productivity need to be weighted against the opportunity cost of education
D) a university education should be required of all members of society

Question 80

Economists have proposed which of the following as contributing to the rising wage gap between skilled and unskilled workers?

A) decreasing international trade
B) technological improvements in capital stocks
C) the increasing role of unions in setting skilled wage scales
D) skilled workers are doing jobs that are increasingly dangerous