Question 1

In 2015,the median weekly earnings of union members was roughly 25% higher than the median weekly earnings of workers not represented by unions.

Accepted Answer

This information is supported by data from the Bureau of Labor Statistics in 2015.

Question 2

Compensating differentials are used to motivate employees and to reduce worker turnover.

Accepted Answer

Compensating differentials refer to offering higher wages or benefits to employees in order to compensate them for working in jobs with less desirable conditions, such as physically demanding work or working in remote areas. By offering these benefits, employers can help motivate employees to stay with the company and reduce worker turnover.

Question 3

Differences in talent and ability of workers resulting in differences in their wages is consistent with the marginal productivity theory of income distribution.

Accepted Answer

According to the marginal productivity theory, the wage rate of a worker is proportional to his/her marginal productivity. Since workers with higher levels of talent and ability are likely to have higher marginal productivity, differences in wages between workers can be attributed to differences in their talent and ability. Therefore, the statement is true.

Question 4

Workers with more human capital usually generate a higher value of the marginal product.

Accepted Answer

Human capital refers to the knowledge, skills, and education that workers possess, which can increase their productivity and efficiency. As a result, workers with more human capital are able to generate a higher value of the marginal product, which is the additional output that is produced by adding one more unit of labor. Therefore, the statement is true.

Question 5

Holly and Emily both have a bachelor's degree in nursing from the same college.Both have been nurses for eight years.Holly works from 11 P.M.until 7 A.M. ,and Emily works from 7 A.M.until 3 P.M.Holly's salary is $1,000 per month higher than is Emily's salary.This is an example of an efficiency wage disparity.

Accepted Answer

This is not an example of an efficiency wage disparity, as the difference in salary is due to differences in work hours and not productivity or performance.

Question 6

A lumberjack cutting giant redwoods in California being paid more than is a person cutting and selling small Christmas trees is an example of wage disparity due primarily to differences in human capital.

Accepted Answer

This example illustrates wage disparity more likely due to differences in the value of the product and market demand rather than differences in human capital.

Question 7

Efficiency wages reduce unemployment.

Accepted Answer

Efficiency wages can actually increase unemployment because they are higher than the market-clearing wage, leading employers to hire fewer workers.

Question 8

Market forces tend to work against discrimination.

Accepted Answer

Market forces reward companies that do not discriminate by attracting a diverse customer base and talented workforce, while companies that do discriminate may face negative publicity, legal action, and loss of business. As a result, discrimination is generally not a sustainable business practice in a competitive market.

Question 9

In 2015,the median weekly earnings of union members was actually lower than the median weekly earnings of workers not represented by unions.

Accepted Answer

In 2015, the median weekly earnings of union members were typically higher than those of workers not represented by unions. Union members often benefit from collective bargaining, which can lead to better wages, benefits, and working conditions.

Question 10

Unions are organizations of workers that try to raise wages and improve working conditions for their members through collective bargaining with employers.

Accepted Answer

Unions exist for the purpose of improving the working conditions of their members through collective bargaining with employers.

Question 11

Holly and Emily both have a BS in nursing from the same college.Both have been nurses for eight years.Holly works from 11 P.M.until 7 A.M. ,and Emily works from 7 A.M.until 3 P.M.Holly's salary is $1,000 per month higher than is Emily's salary.This is an example of a wage disparity due to a compensating differential.

Accepted Answer

A compensating differential is a difference in salary that compensates for differences in work conditions, such as working night shifts. In this case, Holly's higher salary compensates for the less desirable work hours she has to work compared to Emily. Therefore, this is an example of a wage disparity due to a compensating differential.

Question 12

An efficiency wage is higher than the equilibrium wage to motivate the employee to work hard.

Accepted Answer

An efficiency wage is intentionally set higher than the equilibrium wage as an incentive for employees to work harder and perform better on the job. This approach can lead to reduced turnover, improved morale, and increased productivity.

Question 13

Differences in the attractiveness of different types of jobs resulting in differences in wages is not consistent with the marginal productivity theory of income distribution.

Accepted Answer

The marginal productivity theory of income distribution suggests that wages are determined by the level of productivity of the worker, not the attractiveness of the job. Therefore, differences in the attractiveness of jobs should not result in differences in wages according to this theory.

Question 14

When interferences in the labor market raise the wage above the equilibrium level,employers may discriminate because there are more job applicants than jobs.

Accepted Answer

When the wage is above the equilibrium level due to interferences, there will be more job applicants than jobs available. This gives employers more power to discriminate and choose certain groups of workers over others.

Question 15

Regardless of gender and ethnicity,more education is associated with higher median earnings.

Accepted Answer

Studies have consistently shown that individuals with higher levels of education tend to earn higher median earnings compared to those with less education. This is true regardless of gender and ethnicity.

Question 16

The fact that members of labor unions often have higher wages than do workers who are not members of a union is proof that the marginal productivity theory of income distribution is not valid.

Accepted Answer

The fact that union members often have higher wages does not invalidate the marginal productivity theory of income distribution; it may reflect the bargaining power of unions to secure wages closer to the marginal productivity of their members, among other factors.

Question 17

Above-equilibrium wages paid by some employers as an incentive for better performance are called efficiency wages.

Accepted Answer

Efficiency wages are above-equilibrium wages paid by employers to incentivize employees to improve job performance, reduce turnover, and avoid shirking on the job.

Question 18

In 2015,fewer than 10% of the employees of private businesses were represented by unions.

Accepted Answer

According to the Bureau of Labor Statistics, in 2015, 6.7% of private-sector employees were members of unions.

Question 19

Above-equilibrium wages paid by some employers as an incentive for better performance are called compensating differentials.

Accepted Answer

Compensating differentials refer to wage differences across jobs that compensate workers for the non-monetary characteristics of different jobs, such as risk or undesirable hours, not for better performance. Above-equilibrium wages paid as an incentive for better performance are often referred to as efficiency wages.

Question 20

Unions and efficiency wages usually lead to wages that are below the equilibrium level.

Accepted Answer

Unions and efficiency wages may lead to wages that are above the equilibrium level, as they may cause a shift in the labor market demand curve, resulting in higher wages. This is especially true for skilled laborers who are members of powerful unions. Efficiency wages may also lead to higher wages by incentivizing workers to work harder and stay longer with a company.

Quiz 19: Factor Markets and the Distribution of Income