Deck 20: Earnings, Unions and Discrimination

Question 1

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

Answer 1

True

Question 2

Human capital is the accumulation of investments in people.The most important type of human capital is education.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

The neoclassical theory of the labour market suggests that wages are governed by labour supply and labour demand.

Question 6

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

Question 7

Some economists suggest that international trade has led to an expanding wage gap between high-skill and low-skill workers.

Question 8

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 9

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

Question 10

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

Question 11

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 12

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

Question 13

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 14

Labour unions will generally decrease the quantity of labour demanded.

Question 15

When differences in human capital among workers lead to discrimination, it is typically a result of social or political processes rather than economic processes.

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

Unions are a type of cartel.

Question 29

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

Question 30

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

Question 31

According to the signaling view of education, a university education enhances productivity.

Question 32

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 33

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

Question 34

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

Question 35

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 36

All economic explanations of the gender pay gap are associated with discrimination both by consumers and employers, rather than differences in productivity.

Question 37

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

Question 38

Compensating differentials are differences in wages that arise from non-monetary characteristics of different jobs.

Question 39

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 40

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 41

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 42

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 43

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 44

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 45

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

A)the job in Africa is likely to have a large amount of job satisfaction, so the large pool of applicants will likely lead to a low wage
B)the job cleaning motel rooms is likely to be disagreeable, so a small pool of applicants for the job will likely lead to a higher wage
C)the job that requires the most experience will likely have a higher wage
D)all of the above are true

Question 46

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 47

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 48

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 49

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 50

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 51

For a given wage, which of the following statements is true?

A)the supply of labour for easy jobs exceeds that for difficult jobs
B)the supply of labour for fun jobs exceeds that for dull jobs
C)the supply of labour for safe jobs exceeds that for dangerous jobs
D)all of the above

Question 52

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 53

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 54

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 55

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 56

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 57

Which of the following are determinates of equilibrium wages:
(i) the supply of labour
(ii) the demand for labour
(iii) the non-monetary characteristics of the job

A)(i) only
B)(ii) only
C)(ii) and (iii) only
D)(i), (ii) and (iii)

Question 58

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 59

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 60

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 61

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 62

A prestigious private high school requires all of its teachers to have a PhD in the subject they teach.This requirement is likely to:

A)decrease the supply of teachers to this school
B)increase wages for teachers at the private school, relative to those at public schools
C)increase the marginal product of teachers at the private school
D)do all of the above

Question 63

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 64

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 65

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 66

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

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

Question 67

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 68

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 69

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 70

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 71

Professors often have similar levels of education to lawyers and doctors, but typically get much lower salaries.This difference in income is likely to mean that:

A)university education really isn't very valuable
B)professors do a job that is much more difficult than a doctor or lawyer
C)professors must receive a compensating wage differential
D)all of the above are true

Question 72

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 73

From the perspective of market demand, human capital investment is reflected in:

A)a firm's willingness to pay more for more productive workers
B)a decrease in labour demand
C)a decrease in the marginal product of labour
D)all of the above

Question 74

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 75

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 76

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 77

When an employer pays the cost of educating a worker, it is likely that:

A)the employer cannot be maximising profit
B)the employer hopes to recapture its investment in labour productivity increases
C)the employer is demonstrating altruistic motives
D)none of the above is true

Question 78

Identify the statement below that would be an investment in human capital?

A)a new fishing boat that can carry more crew
B)a university degree
C)the purchase of a larger trawling net to enhance labour productivity
D)all of the above

Question 79

Expenditure on human capital:

A)reflects an investment of resources today, to raise productivity in the future
B)reflects an expectation of some future return on the investment
C)is generally embodied in a specific individual
D)all of the above are true

Question 80

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