Question 1

In recent decades, more women than men have received undergraduate degrees. Consequently, women's wages will:

Accepted Answer

According to human capital theory, education and skills contribute to an individual's productivity and earnings potential. As more women receive undergraduate degrees, their human capital will increase, which should lead to an increase in their wages.

Question 2

As an employee at a convenience store, I am content to stay with my employer because my wage is 50% higher than the market rate. What economic theory could justify my employer's willingness to pay above the market rate?

Accepted Answer

Efficiency wage theory suggests that employers pay above-market wages to increase productivity, reduce turnover, and attract higher-quality employees.

Question 3

Why might I expect a fast-food job to pay a wage higher than the minimum wage?

Accepted Answer

Fast food jobs have high turnover rates, and an efficiency wage can be offered to reduce this turnover. An efficiency wage means paying more than the minimum wage to motivate workers to stay with the job, perform better, and reduce the costs of recruitment and training new workers.

Question 4

One frequently sees a strong relationship between median annual earnings and education level. What theory would suggest that education provides valuable skills?

Accepted Answer

The human capital theory suggests that education provides valuable skills that increase an individual's productivity and earning potential in the labor market. Thus, the strong relationship between median annual earnings and education level can be explained by the accumulation of human capital through education.

Question 5

What is a significant difference between a union job and a non-union job in terms of pay?

Accepted Answer

Union jobs often pay more than nonunion jobs because unions have the power to negotiate wages on behalf of their members, and the threat of a strike is a significant bargaining tool that can lead to higher wages.

Question 6

If you were the chief economics planner in Mitchell, South Dakota, a rural location that boasts the world's largest corn palace, what would be your biggest challenge in encouraging economic development in terms of location?

Accepted Answer

In a rural or less desirable location, employers often need to offer higher wages to attract and retain employees who might otherwise prefer urban areas with more amenities and opportunities.

Question 7

What theory would suggest that an employee should receive a wage higher than the equilibrium wage rate?

Accepted Answer

The efficiency wage theory suggests that paying employees above the equilibrium wage rate can increase productivity, reduce turnover, and attract higher-quality workers. The higher wage serves as an incentive for employees to work harder and stay with the company longer, ultimately benefiting the employer in the long run.

Question 8

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

Accepted Answer

Women may have fewer years of work experience due to taking time off for caregiving responsibilities or experiencing career interruptions. This can result in lower salaries and fewer promotions compared to men who have uninterrupted careers.

Question 9

My mother told me that I needed to go to college because it would be the only way I could get a high-paying job. What economic theory would justify her advice?

Accepted Answer

The economic theory that justifies this advice is human capital theory. According to this theory, education and training are investments in an individual's human capital, which can lead to higher productivity and earnings in the labor market. Therefore, going to college can increase an individual's human capital and improve their chances of obtaining higher-paying jobs.

Question 10

The cost of education at an Ivy League university is over $50,000 per year. At a community college, the cost of education is only a few thousand dollars per year. What economic theory could justify enrolling in an Ivy League school?

Accepted Answer

The economic theory that justifies enrolling in an Ivy League school is the "signal" theory. This theory states that attending a prestigious university such as an Ivy League school provides a signal to potential employers that the student is intelligent, hardworking, and possesses desirable qualities that make them a valuable asset to the company. This signal can give them an advantage when applying for jobs and negotiating higher salaries, outweighing the high cost of education.

Question 11

A white male from the Midwest earns $50,000 a year and a white female earns $40,000 a year. What can we conclude about this situation?

Accepted Answer

The information provided does not include details about the job roles, experience, education, or other factors that could explain the pay difference, making it impossible to conclude if discrimination is present based solely on the salary difference.

Question 12

In which of two unionized firms would you expect workers to receive higher wages?

Accepted Answer

In a unionized firm where the threat of a strike is high, workers have more bargaining power and are therefore more likely to negotiate for higher wages. This is because a strike would be more costly for the firm due to lost production, and the union could potentially attract negative publicity that could hurt the firm's reputation.

Question 13

What theory suggests that learning material on your own would not generate the same benefits as those achieved by formally attending classes and receiving a degree?

Accepted Answer

The signal theory suggests that attending formal classes and receiving a degree serves as a signal to future employers of a person's ability to learn and complete tasks, and therefore is more valuable than learning material on one's own. This is because the degree serves as proof that the individual has met certain requirements and has achieved a level of knowledge recognized by the industry. The other theories listed do not specifically apply to this scenario.

Question 14

When comparing a union job to a non-union job, we would expect to see:

Accepted Answer

Typically, employees holding union jobs receive higher wages due to collective bargaining and negotiation with their employer. Unionized jobs also often provide better benefits, such as healthcare and retirement plans, for their employees.

Question 15

Using an efficiency wage theory, why do some individuals earn more than the market equilibrium wage?

Accepted Answer

According to efficiency wage theory, employers may pay their workers more than the market equilibrium wage in order to motivate them to work harder and be more productive. By offering higher wages, employers can attract and retain more productive workers who are willing to work harder and stay with the company for longer periods of time. Therefore, workers who are more productive are able to command higher wages than the equilibrium wage.

Question 16

As the owner of a television studio, I am concerned about the high wages I must pay my employees relative to wages paid by other television studio owners. A consultant has suggested that my location is a contributing factor to these higher wages because I have built my studio in a(n):

Accepted Answer

The answer of As the owner of a television studio,...

Question 17

As an Internet retailer, I need to find a location for my headquarters. If I am primarily concerned with the cost of labor and want to pay those I hire as little as possible, I should establish my business in a(n):

Accepted Answer

The answer of As an Internet retailer, I need to...

Question 18

What theory would justify a job advertisement that reads: "Help Wanted! Looking for a person willing to stay with the firm for a long time. Excellent pay"?

Accepted Answer

The job advertisement is justifying an efficiency wage theory which suggests that paying higher wages to employees can increase their motivation, productivity, and reduce turnover. The ad is specifically looking for someone willing to stay with the firm for a long time, implying that the firm values loyalty and stability in its employees. The offer of excellent pay is also in line with the efficiency wage theory, as firms may need to offer higher wages to attract and retain the most productive workers.

Question 19

When workers of the same ability are not paid the same amount because of a group characteristic such as ethnic origin or age, we call this:

Accepted Answer

This is the definition of wage discrimination, where employees of the same ability are paid differently based on a group characteristic such as ethnicity or age.

Question 20

As an employer, I want productive employees who will stay with the firm for an extended period of time, so I should pay:

Accepted Answer

The answer of As an employer, I want productive employees...

Quiz 15: Income, Inequality, and Poverty