Question 1

Which of the following factors is not part of an individual's stock of human capital?
A)Intelligence
B)Years of education
C)Employment status
D)Initiative

Accepted Answer

Human capital is the amalgam of factors such as education, training, experience, intelligence, energy, work habits, trustworthiness, and initiative that affects the value of a worker's marginal product. A worker's employment status does not directly affect the worker's human capital.

Question 2

Ben and Ashley are identical in every way except for one: Ashley has a master's degree and Ben does not. You would expect Ashley to be paid:
A)the same amount as Ben.
B)more than Ben and more than his VMP.
C)less than Ben.
D)more than Ben.

Accepted Answer

The fact that Ashley has a master's degree and Ben does not suggests that Ashley has a higher stock of human capital than Ben, implying that she will be paid more than Ben.

Question 3

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.
A)40 percent
B)30 percent
C)20 percent
D)10 percent

Accepted Answer

Studies have found that the union wage premium for workers with the same amount of human capital is about 10 percent.

Question 4

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:
A)labor monopsony.
B)labor union.
C)labor collective.
D)closed shop.

Accepted Answer

A labor union is a group of workers who bargain collectively with employers for better wages and working conditions.

Question 5

Union membership in the United States probably ________ an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively ________.
A)is; high
B)is; low
C)is not; high
D)is not; low

Accepted Answer

Union membership rates in the United States are relatively low. Thus, union membership is probably not an important explanation for earnings differences between individuals.

Question 6

Suppose Sarah has been offered a position as web designer at Firm A and Firm B. Both firms require their employees to work for 9 hours a day, but Firm A allows its employees to have a flexible work schedule, while Firm B requires its employees to be at work from 9am to 5pm. Otherwise, the jobs are identical. You would expect:
A)Sarah's wages to be the same at both firms.
B)Sarah's wages to be higher at Firm A than at Firm B.
C)Sarah's wages to be lower at Firm A than at Firm B.
D)Sarah to turn down both job offers.

Accepted Answer

All else equal, jobs with more favorable working conditions (like flexible work hours)will pay lower wages.

Question 7

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to ________, and the wages of nonunionized workers to ________.
A)rise; fall
B)rise; remain unchanged
C)remain unchanged; fall
D)fall; remain the same

Accepted Answer

If the union is successful at bargaining for higher wages, then the quantity of workers demanded in that part of the labor market will fall. As a result, workers will move into the nonunionized sector, thereby pushing wages in that sector down.

Question 8

An arbitrary preference by an employer for one group of workers over another is termed:
A)customer discrimination.
B)statistical discrimination.
C)employer discrimination.
D)employee discrimination.

Accepted Answer

An arbitrary preference by an employer for one group of individuals over another is called employer discrimination.

Question 9

One reason nonunionized firms do not always drive unionized firms out of business is that:
A)markets are not competitive.
B)unionized firms reduce the value of total output.
C)unionized firms hire more selectively, employing workers with greater human capital.
D)unionized firms receive government subsidies.

Accepted Answer

To the extent that unionized firms employ workers with greater human capital, the workers' greater productivity can offset the higher wages paid to the union workers.

Question 10

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. Suppose all of the jobs currently offer exactly the same annual salary, and that most people prefer leisure to work, all else equal. In order to attract workers, the ________ would have to offer a ________ salary than the others.
A)high school; lower
B)bank; higher
C)investment firm; lower
D)investment firm; higher

Accepted Answer

At the same wage, there would be a shortage of workers at the investment firm because that job has the longest work hours.

Question 11

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. The annual salary for each of these offers is probably:
A)lowest at the investment firm, in the middle at the bank, and highest at the high school.
B)lowest at the bank, in the middle at the investment firm, and highest at the high school.
C)lowest at the high school, in the middle at the investment firm, and highest at the bank.
D)lowest at the high school, in the middle at the bank, and highest at the investment firm.

Accepted Answer

The high school job would likely pay the least, because it both offers more attractive working conditions and more prestige, the investment job would pay the most because of the longer work hours, and the bank job would fall in the middle.

Question 12

Jobs in which there is a higher risk of injury or death will:
A)hire risk-averse workers.
B)pay less than otherwise similar jobs.
C)pay the same as otherwise similar jobs.
D)pay more than otherwise similar jobs.

Accepted Answer

All else equal, jobs with less favorable working conditions will pay higher wages.

Question 13

Curly just graduated from State U and has three job offers: teaching at a prestigious private high school nine months a year with summers off, working forty hours a week at a bank in a small city, and working more than sixty hours a week for a high-powered investment firm in New York. Suppose all of the jobs paid exactly the same annual salary, and that most people prefer leisure to work, all else equal. If that were the case:
A)there would be a shortage of teachers at the high school.
B)there would be a surplus of workers at the investment firm.
C)there would be a surplus of teachers at the high school.
D)people would naturally sort themselves into the job that best suits their talents.

Accepted Answer

If all job paid the same, there would be a surplus of high school teachers because all else people would prefer having a job in which they have more time off.

Question 14

Differences in wage rates associated with differences in working conditions are called:
A)compensating income differentials.
B)equalizing wage ratios.
C)conditional differentials.
D)compensating wage differentials.

Accepted Answer

Compensating wage differentials is the name given to wage differences that are attributable to difference in working conditions.

Question 15

The union wage premium refers to the:
A)dues one must pay in order to be in a union.
B)union wage rate minus union membership dues.
C)deduction for union insurance.
D)amount by which union wages exceed nonunion wages.

Accepted Answer

The union wage differential is the wage differential between unionized and nonunionized workers.

Question 16

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:
A)statistical discrimination factors.
B)human capital.
C)productivity factors.
D)learned behaviors.

Accepted Answer

Human capital is the amalgam of factors such as education, training, experience, intelligence, energy, work habits, trustworthiness, and initiative that affects the value of a worker's marginal product.

Question 17

Which of the following is not a reason why unionized firms can successfully compete with nonunionized firms?
A)Employee morale may be higher at unionized firms, so workers are more productive.
B)Communication between management and workers is better at unionized firms.
C)Labor turnover is lower at unionized firms, so unionized firms have lower hiring costs.
D)Unionized firms are legally protected from price competition with nonunionized firms.

Accepted Answer

There is no legal protection from price competition for unionized firms.

Question 18

The fact that many primary and secondary school teachers enjoy work schedules that coincide with their children's school schedules:
A)implies that teachers will earn less than workers with similar qualifications in other jobs.
B)implies that teachers will earn more than workers with similar qualifications in other jobs.
C)has no bearing on the wages of teachers relative to the wages of workers in other jobs.
D)arises because the market for teachers is a winner-take-all market.

Accepted Answer

All else equal, jobs with more attractive non-pecuniary benefits will pay lower wages.

Question 19

The value of a worker's marginal product of labor:
A)is not affected by a worker's stock of human capital.
B)is lower for workers with more human capital.
C)is higher for workers with more human capital.
D)only depends on a worker's stock of human capital.

Accepted Answer

The higher is a worker's stock of human capital, the higher will be the worker's VMP.

Question 20

A labor union in a labor market is analogous to a(n)________ in an output market.
A)monopsony
B)oligopoly
C)cartel
D)perfect competitor

Accepted Answer

A labor union is a group of sellers that band together to sell their services.

Quiz 13: Labor Markets, Poverty, and Income Distribution

Which of the following factors is not part of an individual's stock of human capital?

Ben and Ashley are identical in every way except for one: Ashley has a master's degree and Ben does not. You would expect Ashley to be paid:

According to the textbook, the union wage premium for workers with the same amount of human capital is about ________.

A group of workers who bargain collectively with employers for higher wages and better working conditions is called a:

Union membership in the United States probably an important explanation for why workers with similar qualifications earn different incomes because union membership rates are relatively .

If workers in one part of the labor market unionize, then all else equal, we would expect the wages of unionized workers to , and the wages of nonunionized workers to .

An arbitrary preference by an employer for one group of workers over another is termed:

One reason nonunionized firms do not always drive unionized firms out of business is that:

Jobs in which there is a higher risk of injury or death will:

Differences in wage rates associated with differences in working conditions are called:

The union wage premium refers to the:

Taken together, factors such as education, training, experience, intelligence, and work habits are known as:

Which of the following is not a reason why unionized firms can successfully compete with nonunionized firms?

The fact that many primary and secondary school teachers enjoy work schedules that coincide with their children's school schedules:

The value of a worker's marginal product of labor:

A labor union in a labor market is analogous to a(n) ________ in an output market.