Question 1

What differentiates the U.S.income inequality ratio from that found in less-developed countries?

Accepted Answer

The income inequality ratio in the United States is lower compared to that found in less-developed countries because the poor in the United States earn more than the poor in less-developed countries. This is due to factors such as a more developed economy, better access to education, and stronger social safety net programs.

Question 2

What theory can explain why a CEO might earn so much more than other managers with similar experience and education at the same company?

Accepted Answer

The winner-take-all theory suggests that in highly competitive industries, the top performers receive disproportionately high rewards while the rest are left with very little compensation. In the case of a CEO, they occupy a highly competitive position which involves making critical decisions for the success of the company. Therefore, the top-performing CEO might earn much more than other managers with similar experience and education.

Question 3

What is the approximate inequality ratio (richest 20% ÷ poorest 20%)in the United States?

Accepted Answer

According to data from the US Census Bureau in 2019, the Gini coefficient (a measure of income inequality) in the United States was 0.48, which translates to an inequality ratio of approximately 15.8.

Question 4

Besides overt sex discrimination,why also might women earn less than men in the workplace?

Accepted Answer

Women tend to be overrepresented in certain fields, such as caregiving, education, and administrative roles, which historically have been undervalued and underpaid. This contributes to a gender pay gap even when factors like education, experience, and hours worked are taken into account.

Question 5

The occupational crowding model of discrimination predicts which of the following?

Accepted Answer

The occupational crowding model of discrimination predicts that, when certain jobs are no longer dominated by a particular gender, the wages for that gender will either fall or rise depending on the gender. Specifically, when women start to move into a male-dominated job, men's wages will fall and women's wages will rise. This is because employers believe men are more valuable and skilled than women and, therefore, pay them more. However, when women start to dominate a job, their wages will start to fall due to the effects of occupational crowding, which occurs when there are too many workers in a particular occupation.

Question 6

Approximately what percentage of the total national income is owned by the poorest 40% (bottom two quintiles)of households in the United States?

Accepted Answer

The answer of Approximately what percentage of the total national...

Question 7

I expect that my wages will increase over time.What theory justifies this expectation?

Accepted Answer

The life-cycle wage pattern theory suggests that wages increase over time as workers gain more experience and skills, and move up the career ladder. As workers progress through their careers, they become more valuable to employers and have more bargaining power, which leads to higher wages. Therefore, it justifies the expectation that wages will increase over time.

Question 8

What theory can partially explain why pink-collar jobs,such as nurse and dental hygienist,earn so little despite the important services they provide?

Accepted Answer

Occupational crowding theory suggests that when a large number of individuals (often women) enter a specific job market, such as nursing or dental hygiene, the increased supply of labor in that field can lead to lower wages. This theory can partially explain why pink-collar jobs, which are predominantly filled by women, tend to have lower earnings despite the critical services they provide.

Question 9

What theory would suggest that a Nobel Prize-winning economist should earn significantly more than other economists?

Accepted Answer

The winner-take-all theory suggests that in certain professions or industries, a small number of top performers receive a disproportionately large share of the rewards, while the majority of workers earn much less. In fields such as sports, entertainment, and academics (such as a Nobel Prize-winning economist), the winner-take-all phenomenon is often observed. This is because the top performers are able to generate a significant amount of revenue or bring prestige to their employers, which justifies paying them a high salary to retain their services.

Question 10

As a male nurse,I often complain about the low pay I receive despite the fact that I have a significant amount of education.What economic theory explains my suppressed wage?

Accepted Answer

Occupational crowding theory suggests that when an occupation becomes feminized or associated with women, the average wage for that occupation will decrease. This is due to a larger supply of labor in the occupation, leading to increased competition and decreased wages. As nursing is a female-dominated profession, it is likely that occupational crowding is contributing to the comparatively low wages for male nurses.

Question 11

If households in the lowest income-earning bracket are doing relatively well compared to those in the highest income-earning bracket,the inequality ratio will:

Accepted Answer

If households in the lowest income-earning bracket are doing relatively well compared to those in the highest income-earning bracket, it means that the gap between the two is shrinking. As a result, the inequality ratio, which measures the ratio of incomes earned by the highest and lowest earners, will fall.

Question 12

What role does a strong government play in economic development?

Accepted Answer

A strong government plays a crucial role in economic development by providing a stable environment for investors and businesses to operate in. One way it can do this is by removing corruption, which can discourage investment and hinder economic growth. By promoting transparency and accountability, a strong government can increase investor confidence and attract more investment into the economy, leading to long-term economic growth.

Question 13

What role does corruption play in creating income inequality?

Accepted Answer

The answer of What role does corruption play in creating...

Question 14

The pay for journalists is quite varied.A top-tier journalist often receives a steady flow of assignments,such as two weekly columns,and so earns generous pay.A lower-tier journalist,however,often experiences sporadic work assignments with little to no pay.What economic theory explains this situation?

Accepted Answer

The situation described in the question is best explained by the winner-take-all economic theory, which suggests that a few top performers in a field earn most of the rewards and are able to maintain their positions due to factors like reputation and network effects. This leads to a large disparity in pay between top-tier journalists who are in high demand and lower-tier journalists who have to compete for sporadic assignments with little pay.

Question 15

Why do the wages of those near retirement decrease slightly?

Accepted Answer

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Question 16

You have an idea to provide a grocery home-delivery service in the developing country of Mongolia.What role would corruption play in the success of your business?

Accepted Answer

Corruption in developing countries can lead to legal and bureaucratic hurdles, bribes, and extortions that can make it difficult to start or grow a business. It can also undermine the rule of law, erode public trust, and limit access to financing, technology, and human resources. Therefore, corruption can discourage entrepreneurs from investing in their businesses and hinder their chances of success.

Question 17

If your daughter were to inform you that she wanted to be a bank teller and you were concerned about her ability to pay her bills,what economic theory could you use to convince her to become an engineer instead?

Accepted Answer

The answer of If your daughter were to inform you...

Question 18

Which statement best represents the phenomenon of occupational crowding?

Accepted Answer

Occupational crowding refers to the phenomenon where certain occupations are dominated by one gender or ethnic group, leading to a lack of diversity and potential discrimination. Women tend to be overrepresented in certain jobs, such as teaching, nursing, and administrative support, while men dominate fields such as engineering, construction, and technology. This can lead to gender pay gaps and other inequities in the workforce. Therefore, statement A represents the phenomenon of occupational crowding.

Question 19

What is the name of the model that best explains why an actor in a nationally broadcast television program earns so much more than an actor who is equally talented and productive but who performs in a local play?

Accepted Answer

The winner-take-all model suggests that in certain industries, such as entertainment, there is intense competition for top positions and a disproportionate amount of rewards go to those who are able to achieve those top positions. This explains why a nationally broadcast television actor may earn much more than a local play actor, even if they have similar levels of talent and productivity.

Question 20

Why is it unlikely that income inequality could ever be eliminated?

Accepted Answer

Income inequality is driven by differences in skills, abilities, and productivities among workers. Eliminating income inequality would require that all workers have the same skills, abilities, and productivities, which is highly unlikely. Therefore, option D is the best answer, as it acknowledges that income inequality is rooted in fundamental differences among workers. Options A and E are incorrect because they oversimplify the issue by assuming that workers have the same skills and goals, respectively. Option B is incorrect because it ignores the fact that some jobs are more attractive than others, which can affect wages. Option C is incorrect because it assumes that workers are perfectly mobile, meaning they can easily move to different jobs or locations to maximize their incomes. This is not always the case in reality, as workers may face barriers such as lack of education or job training, family responsibilities, or limited job opportunities in certain areas.

Quiz 15: Income,inequality,and Poverty