Deck 19: Earnings and Discrimination

Question 1

Economists who attempt to explain the increasing earnings gap between skilled and unskilled workers offer two main hypotheses:

A)One hypothesis emphasizes education,and the other emphasizes random influences.
B)One hypothesis emphasizes education,and the other emphasizes supply and demand.
C)One hypothesis emphasizes international trade,and the other emphasizes technology.
D)One hypothesis emphasizes signaling,and the other emphasizes education.

Answer 1

C

Question 2

Suppose that a company hires recent college graduates for two types of jobs,sales people and credit analysts.The hours worked and skill levels are the same for both positions.The sales people get to travel to several desirable locations,whereas the credit analysts do not leave the home office.When comparing the salaries of the two positions,it is likely that the company pays the

A)sales people less as a compensating differential.
B)credit analysts less as a compensating differential.
C)Same salary for both positions because they require the same skill level.
D)Same salary for both positions because it would be illegal to do otherwise.

Answer 2

A

Question 3

Which theory is supportive of the idea that increasing educational levels for all workers would raise all workers' productivity and therefore their wages?

A)the theory of compensating differentials
B)the efficient-market hypothesis
C)human-capital theory
D)signaling theory

Answer 3

C

Question 4

Suppose that a company hires recent college graduates for two types of jobs,sales people and credit analysts.The hours worked and skill levels are the same for both positions.The sales people must "cold call," which many people find to be unpleasant.When comparing the salaries of the two positions,it is likely that the company pays the

A)credit analysts more as a compensating differential.
B)sales people more as a compensating differential.
C)same salary for both positions because they require the same skill level.
D)same salary for both positions because it would be illegal to do otherwise.

Question 5

The time spent by students in college

A)leads to lower lifetime earnings because opportunity costs are high.
B)is an investment in human capital.
C)decreases human capital by lowering work experience.
D)increases as the wages paid to low-skilled workers rise.

Question 6

A difference in wages that arises to offset the nonmonetary characteristics of different jobs is known as

A)a compensating differential.
B)an inefficiency wage.
C)the equilibrium difference.
D)a union wage.

Question 7

Which of the following might explain the beauty premium found by labor economists Hamermesh and Biddle?

A)Good looks are an innate ability for some jobs,which results in higher productivity and higher wages.
B)Good looks may be an indirect measure of other types of ability such as attention to detail.
C)If better-looking people earn more than average-looking people,employers may be discriminating based on personal appearance.
D)All of the above could explain the beauty premium.

Question 8

Public school teachers are known to have low wages.Which of the following would push the teachers' wages lower?

A)Public school teacher jobs are difficult.
B)Public school teachers are required to be college graduates.
C)Public school teachers belong to a union.
D)Teaching in a public school has a high element of personal satisfaction.

Question 9

Which of the following would be considered an investment in human capital?

A)education
B)a teacher's blackboard
C)the purchase of a new computer to enhance labor productivity
D)All of the above are correct.

Question 10

When the supply of workers is plentiful,one would predict that market wages would be

A)determined outside the domain of economic theory.
B)determined solely by factors that affect demand.
C)low,other things equal.
D)high,other things equal.

Question 11

In determining wages,ability,effort,and chance

A)probably play no role whatsoever.
B)play a role,but their importance is hard to gauge since ability,effort,and chance are hard to measure.
C)play a role,and that role is fully captured in easy-to-measure factors such as human capital and age.
D)play a role,and it is fully explained within the context of compensating differentials.

Question 12

In general,the higher a person's education level,

A)The higher the person's earnings.
B)The more physically attractive the person is likely to be.
C)The more socially outgoing the person is likely to be.
D)All of the above are correct.

Question 13

Workers whose skills become obsolete as a result of technological change are often paid a lower wage as a result of

A)natural ability.
B)geographic location of employment.
C)chance.
D)work effort.

Question 14

Which of the following would be considered human capital?

A)the financial capital a person earns over a lifetime of investing
B)the machinery a worker uses to produce a product
C)the training a worker receives when starting a new job
D)the break room in a factory where employees go to have coffee

Question 15

Coal mining is a dangerous and dirty job.Suppose someone developed new machinery that made coal mining safer and cleaner; at the same time,suppose it made coal miners more productive.We would expect that the wages of coal miners would

A)rise.
B)fall.
C)stay exactly the same.
D)rise,fall,or stay the same.

Question 16

Who among the following individuals most likely experiences the largest nonmonetary reward as a supplier of labor?
Assume all of the four individuals have the same level of education and work the same number of hours per week.

A)Albert,who prefers to be around other people but who works at home by himself
B)Amy,whose job provides little intellectual and personal satisfaction
C)Antoinette,whose preference is to avoid dangerous work but works as a firefighter
D)Arnold,who works the night shift and prefers to work at night and sleep during the day

Question 17

When robots are used to replace workers on a factory production line,the wage gap between skilled and unskilled workers

A)will increase only if the company can increase the price of its product.
B)is likely to increase.
C)is likely to decrease.
D)will not change.

Question 18

Human capital is

A)a stock of equipment and structures.
B)the result of investments workers make in themselves such as on-the-job training.
C)a difference in wages that arises to offset the nonmonetary characteristics of different jobs.
D)inversely related to the supply of workers.

Question 19

Factory workers who work the day shift earn less per hour than similarly-skilled factory workers who work the night shift.The difference in pay is attributed to

A)the marginal product of labor.
B)the marginal product of capital.
C)diminishing marginal returns.
D)a compensating differential.

Question 20

A difference in wages between a highly-educated worker and a less-educated worker

A)may be due to a difference in the amounts of human capital between the workers..
B)may be a signal that the market is indifferent to a worker's level of human capital.
C)is considered unfair by economists.
D)is considered unfair by everyone.

Question 21

Firms that operate in competitive product markets and choose to practice discrimination in hiring workers

A)will survive if they increase production and garner a larger market share.
B)will eventually earn zero economic profits.
C)will survive as long as they are willing to have a smaller market share.
D)are likely to eventually go out of business.

Question 22

A union's major source of power is its

A)high-profile leadership.
B)ability to increase productivity.
C)ability to threaten a strike.
D)ability to deny employers the opportunity to bargain over wages.

Question 23

Which of the following sets of circumstances is likely to provide the best evidence in support of the theory of efficiency wages?

A)Workers in the market are unskilled and not represented by a union,and their wage exceeds both the equilibrium wage and the minimum wage.
B)Workers in the market are highly skilled and not represented by a union,and their wage exceeds the minimum wage.
C)Workers in the market are highly skilled and represented by a union,and their wage exceeds the equilibrium wage.
D)Employers in the market are known for reducing the workers' wage whenever they get an opportunity to do so.

Question 24

Discrimination by a manager in the hiring process

A)decreases the firm's costs.
B)increases the firm's costs.
C)is evident if a white manager refuses to hire a Hispanic worker.
D)is evident if a 30-year-old manager refuses to hire a 50-year-old worker.

Question 25

Tom,the manager and owner of a small company,believes in the signaling theory of education,not the human capital theory.As such,Tom would be most likely to agree with which of the following quotes?

A)"We encourage our employees to enroll in night classes to improve their on-the-job productivity."
B)"We encourage our employees to participate in online seminars to learn new skills."
C)"We pay higher wages to employees who have MBAs because,on average,their job performance is better than similar employees who do not have MBAs."
D)"When we interview prospective employees at job fairs,we are looking for college graduates because they have the determination and follow-through to finish what they start."

Question 26

Discrimination by a manager in the hiring process may be consistent with the decision to maximize profits if

A)customers are willing to pay higher prices in order to maintain the discrimination.
B)the discrimination is based on race but not gender.
C)the discrimination is based on gender but not race.
D)Discrimination is never consistent with profit maximization.

Question 27

A worker association that bargains with employers over wages and working conditions is called

A)a strike.
B)an oligopoly.
C)a firm.
D)a union.

Question 28

A signaling theory of education suggests that educational attainment

A)is a signal of high marginal productivity.
B)is correlated with natural ability.
C)increases the productivity of low-ability workers.
D)Both a and b are correct.

Question 29

A college degree makes a person more productive according to

A)both the human-capital and the signaling theories of education.
B)the human-capital but not the signaling theory of education.
C)the signaling but not the human-capital theory of education.
D)neither the human-capital nor the signaling theory of education.

Question 30

If men,on average,earn 20 percent more than women in a particular occupation,

A)this is clear evidence of discrimination.
B)some of this differential could be due to differences in educational levels.
C)some of this differential could be due to differences in human capital.
D)Both b and c are correct.

Question 31

For a "superstar" to emerge,it must be the case that

A)it is possible to supply the good or service that the superstar produces at low cost to every customer.
B)some customers are willing and able to pay large sums of money to enjoy the good or service provided by the superstar.
C)the superstar has a natural monopoly on his or her good or service.
D)the superstar is willing to settle for a level of pay that is less than the value of his marginal product.

Question 32

If the signaling theory of education is correct,

A)workers with more years of formal schooling will earn less than workers with fewer years of formal schooling.
B)additional years of formal schooling do not increase a worker's productivity.
C)workers with more years of formal schooling are less likely to be affected by ability,effort,and chance.
D)men are more likely to earn more than women because men are more likely to have graduated from college.

Question 33

A natural correction to employer discrimination in market economies is the

A)threat of judicial review.
B)profit motive.
C)political process.
D)union movement.

Question 34

Which theory explains the fact that some firms may choose to pay their employees more then they would earn as determined by equilibrium in the labor market?

A)the theory of efficiency wages
B)the marginal-productivity theory
C)human-capital theory
D)signaling theory

Question 35

According to the signaling theory of education,

A)schooling sends signals to employers in much the same way that advertising sends signals to consumers.
B)a person becomes more productive by earning a college degree.
C)education is less important than natural ability.
D)All of the above are correct.

Question 36

Technology is an important factor in explaining the high incomes of superstars because

A)technology accounts for differences in incomes within all occupations.
B)technology makes it possible for the best producer to supply every customer at low cost.
C)technology that can limit access to the superstars is available.
D)only technologically-literate superstars can earn super incomes.

Question 37

Which of the following is the most likely outcome of minimum wage laws?

A)an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms
B)an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms
C)a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms
D)a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms

Question 38

When employers pay an efficiency wage above the market equilibrium wage,this will likely result in

A)a surplus of labor.
B)no unemployment.
C)an increase in the number of people employed.
D)an decrease in the quantity of labor supplied.

Question 39

Which of the following statements is correct?

A)Compensating wage differentials reflect different skills of workers.
B)Discrimination by employers affects the marginal productivity of workers.
C)The signaling theory of education suggests that schooling does not affect worker productivity.
D)The superstar phenomenon explains why more talented entertainers earn more than less talented entertainers.

Question 40

Most economists believe that the higher average salaries earned by men in comparison to women arise from

A)discrimination.
B)a variety of factors,including differences in human capital and compensating differentials; few economists believe that gender discrimination in earnings exists.
C)differences in human capital as the primary reason.
D)a variety of factors,including differences in human capital,compensating differentials,and discrimination.

Question 41

It is likely that,if we could measure the quality as well as the quantity of education,

A)the human-capital argument would become less compelling as a means of explaining wage differentials between white workers and black workers.
B)the human-capital argument would become less compelling as a means of explaining wage differentials between male workers and female workers.
C)wage differentials between white workers and black workers would be more puzzling than they are now.
D)wage differentials between white workers and black workers would be more fully explained.

Question 42

Men and women tend to choose different types of occupations,and so

A)a source of wage differences between men and women is differences in human capital.
B)a source of wage differences between men and women is compensating differentials.
C)the gap between the earnings of men and the earnings of women is likely even more significant than the data alone indicate.
D)we should expect the earnings of women to rise relative to the earnings of men,in order to induce women to accept jobs that they have been reluctant to accept in the past.

Question 43

Business owners who care only about making money are

A)likely to discriminate against certain groups of workers.
B)likely to be replaced by discriminating businesses.
C)more concerned about racial discrimination than gender discrimination.
D)at an advantage when competing against those who practice discrimination.

Question 44

In the presence of discrimination by customers,

A)market forces nevertheless always work to prevent discriminatory wage differentials.
B)discriminatory wage differentials can exist,but only if firms refrain from maximizing their profits.
C)discriminatory wage differentials can exist,but only if government reinforces customers' practices by passing laws that mandate discrimination.
D)discriminatory wage differentials can exist,even in the absence of discriminatory practices by firms or by government.

Question 45

If there is systematic discrimination against a group of workers,then the wage paid to those workers likely will be

A)lower due to a higher supply of workers in that group.
B)lower due to a lower demand for workers in that group.
C)higher due to a lower supply of workers in that group.
D)higher due to a higher demand for workers in that group.

Question 46

Compensating differentials are differences in wages related to the characteristics of a job.

Question 47

As a result of an increase in the earnings gap between skilled and unskilled jobs,the incentive to get a college education has been declining.

Question 48

A compensating differential refers to a difference in wages that arises from nonmonetary characteristics.

Question 49

The competition experiment conducted by economists Muriel Niederle and Lise Vesterlund was consistent with the results of Terry Odean which were that

A)men were better at math than women.
B)men chose competition more because they were better at sports than women.
C)men trade stocks excessively while women adopt a buy-and-hold strategy.
D)streetcar companies were not in favor of segregation because it hurt their profits.

Question 50

Some discriminatory hiring practices can be expected,even if markets are competitive,as a result of

A)unrestricted entry and exit in markets.
B)lower costs of hiring.
C)a perfectly elastic market demand.
D)customer preferences.

Question 51

Superstars earn high incomes due to their ability to satisfy the demands of millions of people at once.

Question 52

The economic theory of labor markets suggests that wages are determined by labor supply and labor demand.

Question 53

Sometimes workers earn higher wages through chance.

Question 54

Which of these instances would constitute labor-market discrimination?
Traci and Carol are identical in all of their labor-market characteristics except that Traci earns a higher salary than Carol because

A)Traci is beautiful and Carol is not.
B)Traci is 40 years old and Carol is 60 years old.
C)Traci works the night shift and Carol works the day shift.
D)Traci has 15 years of experience and Carol has 10 years of experience.

Question 55

A competitive market may be consistent with a discriminatory wage differential if

A)firms' customers have discriminatory preferences.
B)the wage differential is explained by a compensating differential.
C)the wage differential is explained by differences in human capital.
D)All of the above are correct.

Question 56

Education and on-the-job training are sources of human capital.

Question 57

Economists argue competitive markets provide a "natural remedy" to discriminatory wage practices.Which of the following is widely recognized as a potential limit to the effectiveness of that natural remedy?

A)Some workers are members in unions.
B)Some firms pay efficiency wages; others do not.
C)Some customers are discriminatory in their buying habits.
D)Some employees have accumulated more human capital than other employees.

Question 58

An effective minimum wage law will increase the quantity of labor demanded.

Question 59

It is likely that efficiency wages will decrease employee effort.

Question 60

The fact that doctors are paid more than economics professors is an example of a compensating differential.

Question 61

Differences in human capital among groups of workers is possibly a reflection of past discrimination.

Question 62

Explain the theory that education acts as a signaling device.How does this contrast with the theory of education as an investment in human capital?

Question 63

After graduating from college,you receive job offers from five different accounting firms.All job offers have a different compensation package.Is it irrational for you to accept an offer that doesn't provide the highest level of monetary compensation?
Use the concept of compensating differentials to explain your answer.

Question 64

One example of labor-market discrimination is that firms may be less likely to interview job-market candidates whose names suggest that they are members of a racial minority.

Question 65

If an older worker earns less than a younger worker for the same job,we have proof of age discrimination.

Question 66

List the productivity factors that may explain the differences in pay between men and women in similar occupations.Do any of these factors arise as a result of cultural or social traditions?
If so,describe how changes in social relationships will affect the pay gap over time.

Question 67

Discrimination is usually not a profit-maximizing strategy.

Question 68

Explain how compensating differentials could contribute to differences between the average wages of men and women.

Question 69

Consumers are often a primary source of discrimination in labor markets.

Question 70

Explain the role that consumers play in perpetuating discrimination in labor markets.