Question 1

One objection to the marginal productivity theory of income distribution is the existence of large disparities in income between factors of production that should receive the same payment.

Accepted Answer

The existence of large disparities in income between factors of production that should receive the same payment challenges the marginal productivity theory of income distribution.

Question 2

A lumberjack cutting giant redwoods in California being paid more than is a person cutting and selling small Christmas trees is an example of wage disparity due primarily to compensating differentials.

Accepted Answer

Compensating differentials refer to the higher pay offered to jobs that require more difficult, dangerous, or undesirable working conditions. Cutting giant redwoods is more difficult and dangerous than cutting small Christmas trees, and therefore, the lumberjack is likely to be paid more as a form of compensating differential.

Question 3

An objection to the marginal productivity theory of income distribution is that many people believe it is a moral justification for the unequal distribution of income.

Accepted Answer

Many critics argue that the marginal productivity theory suggests that individuals receive income according to their contribution to society, and therefore justifies income inequality. However, others argue that the theory only explains how wages are set in competitive markets and does not make moral judgments about income distribution.

Question 4

Median earnings in the U.S.labor market are highest for White men,followed by African-Americans,followed by women (regardless of ethnicity),and then Hispanics.

Accepted Answer

Median earnings in the U.S. labor market are highest for White men, followed by Asian men, then White women, followed by African-American men, then African-American women, followed by Hispanic men, and then Hispanic women. The order may shift depending on the specific industry, occupation, and education level.

Question 5

The fact that Tom Brady,the quarterback of the New England Patriots,is paid more than is a high school football coach is an example of a wage disparity caused by compensating differentials.

Accepted Answer

The wage disparity between Tom Brady and a high school football coach is more accurately attributed to factors such as skill level, market demand, and revenue generation, rather than compensating differentials, which refer to wage differences due to the non-monetary aspects of different jobs (e.g., risk, working conditions).

Question 6

Wage differentials that arise because of innate differences in ability or talent are consistent with the marginal productivity theory of income distribution.

Accepted Answer

The marginal productivity theory of income distribution states that wages are based on the marginal productivity of labor, meaning that individuals with higher levels of productivity will earn higher wages. This theory is consistent with innate differences in ability or talent resulting in wage differentials.

Question 7

At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This is partially because diminishing returns to labor cause the value of the marginal product of the last machinist hired to be less than the average of all of the machinists currently employed.

Accepted Answer

The statement is true, as it mentions that the value added by the average skilled machinist is higher than the salary paid to highly skilled senior machinists, and this can be attributed to the concept of diminishing returns to labor.

Question 8

Over the past 30 years,the premium for workers with advanced degrees has decreased.

Accepted Answer

According to a report by the Economic Policy Institute, the premium for workers with advanced degrees has increased over the past 30 years, although it has grown at a slower rate compared to the previous decades.

Question 9

In the U.S.labor market,women of all ethnicities have the highest median earnings of any of the major demographic groups discussed in the chapter.

Accepted Answer

This statement is false. According to the chapter, white men have the highest median earnings in the U.S. labor market, while women of all ethnicities have lower median earnings.

Question 10

In the U.S.labor market,Hispanics have the lowest median earnings of any of the major demographic groups discussed in the chapter.

Accepted Answer

According to the chapter, Hispanics have the lowest median earnings among major demographic groups in the U.S. labor market.

Question 11

Wage differences between men and women and among various ethnic groups are proof that the marginal productivity theory of income distribution is invalid.

Accepted Answer

The marginal productivity theory of income distribution explains income based on the productivity of a factor of production, but wage differences can also result from discrimination, negotiation skills, education levels, and other factors not accounted for by this theory alone.

Question 12

In the U.S.labor market,African-Americans have the lowest median earnings of any of the major demographic groups discussed in the chapter.

Accepted Answer

Hispanic or Latino workers typically have the lowest median earnings compared to other major demographic groups, including African-Americans, in the U.S. labor market.

Question 13

In the U.S.labor market,Hispanic men have the highest median earnings of any demographic group.

Accepted Answer

Asian men have the highest median earnings of any demographic group in the U.S. labor market, followed by White men. Hispanic men come in third place.

Question 14

At Hamill Manufacturing of Pennsylvania,highly skilled senior machinists are paid $70,000,excluding benefits,but the average skilled machinist generates approximately $137,000 in value added.This is due partially to the fact that the wage rate includes other costs,such as employee benefits,that have to be added to the $70,000 salary.

Accepted Answer

The statement is true. The average skilled machinist generates more value added than their $70,000 salary, which includes additional costs such as benefits.

Question 15

The fact that Tom Brady,the quarterback of the New England Patriots,is paid more than is a high school football coach is an example of a wage disparity most likely caused by differences in ability and talent.

Accepted Answer

Tom Brady's higher salary is due to his exceptional ability and talent as a professional football player, which is in high demand and generates significant revenue for the team, while a high school football coach's salary is determined by a different set of factors, such as the size and funding of the school district.

Question 16

In the United States,the median earnings of Hispanics are greater than the median earnings of African Americans.

Accepted Answer

According to data from the U.S. Census Bureau and other economic studies, the median earnings of African Americans are generally higher than those of Hispanics in the United States.

Question 17

Wage differences across jobs reflecting the fact that some jobs are less pleasant or safe than others are called efficiency wages.

Accepted Answer

Wage differences across jobs reflecting the fact that some jobs are less pleasant or safe than others are called compensating differentials, not efficiency wages. Efficiency wages are higher wages paid to increase worker productivity.

Question 18

One objection to the marginal productivity theory of income distribution is the absence of large disparities in income between men and women and various ethnic groups.

Accepted Answer

The absence of large disparities in income between men and women and various ethnic groups is actually a criticism of the marginal productivity theory of income distribution. The theory suggests that individuals are paid according to their productivity, but this may not always be the case due to various factors such as discrimination and unequal access to education and opportunities.

Question 19

The U.S.labor market shows large differences in the median earnings of workers across ethnicities and gender.

Accepted Answer

Studies show that there are significant differences in median earnings between different ethnic and gender groups in the U.S. labor market. For example, according to data from the Bureau of Labor Statistics, in 2020, the median weekly earnings of full-time workers were $1,147 for Asian men, $960 for White men, $736 for Black men, and $724 for Hispanic men. Similarly, the median weekly earnings of full-time workers were $949 for Asian women, $815 for White women, $684 for Black women, and $629 for Hispanic women. These differences are evidence of systemic inequities and discrimination in the labor market.

Question 20

Wage differences across jobs reflecting the fact that some jobs are less pleasant or safe than others are called compensating differentials.

Accepted Answer

Compensating differentials refer to the wage differences that compensate workers for the unpleasant or unsafe aspects of certain jobs.

Quiz 19: Factor Markets and the Distribution of Income