Question 1

Which of the following is an example of a compensating wage differential?

Accepted Answer

Compensating wage differentials occur when workers are paid more for working in jobs that have higher levels of risk, unpleasant working conditions, or other unfavorable job characteristics. Workers in a dynamite mine face the risk of injury or death, leading to a compensating wage differential that makes their wages higher than if they worked in other jobs requiring similar skill levels. The other answer choices do not represent compensating wage differentials.

Question 2

Consider the following pieces of information: a. According to Bonnie Reyes, president and chief operating officer of Better Investing, a national organization of investment clubs, women have traditionally made up about 60 percent of the membership of investment clubs. By contrast, less than a third of team-managed mutual funds on Wall Street have even one woman on the management team.
B. Research conducted by professors E. Brooke Harrington and Max Planck concluded that mixed investment clubs, on average, outperformed the typical single-sex investment club.
C. The lack of gender diversity in Wall Street could be influenced by its reputation, according to professor Harrington, "for being inhospitable to women."
Source: Michael Hulbert, "Strategies: At some Funds, a Gender Communications Gap," The New York Times, October 7, 2007, Sunday Money, page 5.
The information presented is an example of

Accepted Answer

The information presented shows a negative feedback loop in the investment industry, where women are underrepresented in team-managed mutual funds on Wall Street, potentially due to a reputation for being inhospitable to women, resulting in less gender diversity in the industry. This reinforces the status quo and perpetuates the underrepresentation of women. However, mixed investment clubs, on average, outperform single-sex clubs, suggesting that diversity can lead to better outcomes.

Question 3

Economic discrimination takes place when an employer

Accepted Answer

Economic discrimination occurs when an employer pays different wages to workers based on arbitrary characteristics such as race, gender, or religion, which have nothing to do with job performance. This is unfair and can lead to a negative impact on the affected workers.

Question 4

That some talented people may not enter an occupation because they have heard that people with their personal characteristics do not get hired in that occupation is known as

Accepted Answer

The situation described is an example of a negative feedback loop, where a false stereotype or belief about a group of people leads to discrimination and exclusion from certain opportunities, causing a lack of representation in that field, which further reinforces the false belief.

Question 5

If workers in nuclear power plants underestimate the true risk of their jobs,

Accepted Answer

If workers underestimate the true risk of their jobs, it means they are not fully aware of the potential hazards involved in the job. This can result in their wages not being high enough to compensate them fully for the risk they are assuming, which is option C. Option A does not apply because compensating differential can only be paid if employers are aware of the true risk of the job. Option B is incorrect because safety legislation can improve working conditions and reduce the risk of hazards for workers. Option D is also not applicable because if workers do not fully understand the risk, they may still apply for the job and the demand for workers may remain the same.

Question 6

Refer to Scenario 17-1. Following the passage of comparable worth legislation, Unity College responds by placing salaries for all assistant professors at $80,000. Which of the following is the result of the legislation?

Accepted Answer

By setting the salaries for all assistant professors at $80,000, Unity College is effectively ignoring market forces that would have determined different salaries for English professors versus business professors based on supply and demand. This will create a surplus in the market for English professors (since the college is now paying more than the market rate) and the market for business professors will not be affected (since the college is already paying the market rate for these professors).

Question 7

In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name. The study found that

Accepted Answer

The study found that employers were 50 percent more likely to interview workers with white-sounding names than with African-American-sounding names.

Question 8

If national laws protecting the health and safety of workers completely eliminate any and all risk, then

Accepted Answer

Compensating wage differentials compensate workers in risky jobs for the additional risk they face. If national laws completely eliminate any and all risk, there would be no need for compensating differentials, which could result in these workers being no better off in terms of wages.

Question 9

Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?

Accepted Answer

The supply of talented baseball players is low relative to its demand, leading to higher salaries due to the greater marginal benefit of adding a player compared to adding another neurosurgeon.

Question 10

Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market?

Accepted Answer

Differences in wages may be due to many factors, including education, experience, and the firm's size. In addition, some workers prefer jobs with lower pay but more flexible hours or better working conditions, making it challenging to verify that lower wages are due to discrimination.

Question 11

Worker discrimination occurs when

Accepted Answer

The answer of Worker discrimination occurs when
...

Question 12

The primary purpose of labor unions is to

Accepted Answer

The primary purpose of labor unions is to negotiate with employers about wages and working conditions on behalf of their members. They aim to secure better pay, benefits, and protection for workers. While safety training may be a part of union negotiations, it is not the primary purpose. Unions also do not generally mandate identical incomes for all members, and while some unions may endorse candidates and donate to political causes, it is not the main purpose of labor unions.

Question 13

Comparable worth legislation

Accepted Answer

Comparable worth legislation mandates that employers pay the same wages to workers, regardless of their gender, for jobs that have comparable worth. While it may not completely eliminate the earnings gap between men and women, it aims to address pay discrimination for jobs that require comparable skills, education, and responsibilities.

Question 14

Refer to Scenario 17-1. Following the passage of comparable worth legislation, Unity College responds by placing salaries at $65,000. Which of the following is the result of the legislation?

Accepted Answer

The answer of Refer to Scenario 17-1. Following the passage...

Question 15

Women typically earn less than men, even in the same occupation. Which of the following is an explanation for this discrepancy?

Accepted Answer

Women have been historically excluded from the workforce and may have taken time off from work to care for children or family members. This results in less work experience on average compared to men of the same age, which can lead to lower salaries.

Question 16

One reason why the average salary of Major League Baseball players is higher than the average salary of college professors is

Accepted Answer

The marginal revenue product of an individual is the additional revenue generated by the last unit of that person's output. In this case, the marginal revenue product of a Major League Baseball player is likely to be greater than the marginal revenue product of a college professor, due to the high level of revenue generated by the baseball industry. This leads to higher salaries for baseball players.

Question 17

Wage differences among workers of different races and gender could be due to all of the following except

Accepted Answer

Labor unions are not a factor that contributes to wage differences among workers of different races and genders. The other factors listed (preferences for jobs, work experience, and education) can all contribute to differences in wages.

Question 18

Customer discrimination occurs when

Accepted Answer

Customer discrimination occurs when customers refuse to buy products produced by a racially diverse workforce. This is a form of prejudice and can harm businesses and their workers. The other options do not involve customer discrimination.

Question 19

Compensating differentials are

Accepted Answer

Compensating differentials refer to higher wages paid to workers in order to compensate them for unpleasant or undesirable aspects of a job, such as working in hazardous conditions or performing physically demanding tasks. This compensates for the fact that these jobs may be less desirable overall and therefore require higher wages to attract workers.

Question 20

Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

Accepted Answer

Technological advances, such as cable television and digital streaming, have greatly increased the demand for sports entertainment, resulting in higher revenues and profits for sports leagues and teams. This has allowed them to pay top athletes much higher salaries than in the past. Additionally, the rise of endorsement deals and brand sponsorships, made possible by social media and other digital platforms, has also contributed to the growing wage differential between superstar athletes and other occupations. The supply of star athletes, as represented by college athletic programs and international talent pools, has stayed relatively constant. The market power of athletes' unions, while having some influence on player salaries, is a less significant factor than the overall demand for sports entertainment.

Quiz 17: The Markets for Labor and Other Factors of Production