Question 1

Upon graduation, Ellie had two job offers. The jobs were identical in every way with two exceptions. One job was located in San Diego, CA and offered an annual salary of $50,000. The other job was located in Omaha, NE and offered an annual salary of $60,000. The salary difference is due to

Accepted Answer

The salary difference is most likely due to compensating differentials, which reflect the additional cost of living and working in different locations. San Diego is known to have a higher cost of living compared to Omaha, which could explain why the job in San Diego pays less despite being identical in every other way.

Question 2

A Gini coefficient of 0.25 represents less inequality in income distribution than a Gini coefficient of 0.4.

Accepted Answer

The Gini coefficient ranges from 0 to 1, with 0 representing perfect equality (everyone has the same income) and 1 representing perfect inequality (one person has all the income). Therefore, a lower Gini coefficient indicates less inequality in income distribution.

Question 3

In the United States most people's wealth comes from

Accepted Answer

Most people in the United States accumulate wealth through saving, whether it be through personal savings accounts, investments, or retirement accounts. This method allows individuals to gradually build their wealth over time.

Question 4

Related to the Economics in Practice on page 371: Considerable evidence suggests that recently in the United States, executive compensation has ________ and the real wage of the average worker has ________.

Accepted Answer

Executive compensation in the United States has increased significantly, while the real wage of the average worker has remained relatively stagnant over recent years.

Question 5

All Pittsburgh police officers must go through the same training program, but police officers assigned to the narcotics squad earn 10% more than police officers assigned to guard the city courthouse. This 10% difference in pay is an example of a

Accepted Answer

The 10% pay difference is a compensating differential, which is a difference in pay designed to offset the less desirable aspects of a job. In this case, the higher pay for narcotics officers is compensation for the potential dangers and risks associated with their job.

Question 6

Evidence suggests that in the last several decades, technology has played a role in driving inequality. Thus, ________ may be key to reducing inequality in the future.

Accepted Answer

Education is crucial to reducing inequality as it provides individuals with the knowledge and skills needed to succeed in a rapidly changing economy. With the rise of automation and other technological advances, those without a strong education are at a significant disadvantage. Investing in education can help level the playing field and ensure that everyone has equal access to opportunities.

Question 7

Paula was born with an aptitude for learning languages. This aptitude is an example of

Accepted Answer

The aptitude for learning languages is an example of human capital, which refers to the knowledge, skills, and abilities that individuals possess and can use to create economic value. It is not a compensating differential, which is a difference in wages or benefits that compensates for a less desirable aspect of a job, nor is it property or natural capital.

Question 8

Lydia was born with an aptitude for composing music. This aptitude is an example of

Accepted Answer

Lydia's aptitude for composing music is a result of human capital, which refers to the knowledge, skills, and abilities an individual possesses that can lead to economic and personal growth. It is not a compensating differential, which refers to the extra compensation an individual receives for working in a less desirable job, nor is it property or natural capital.

Question 9

Wage and property income before transfers and taxes is known as market income.

Accepted Answer

Wage and property income before any government transfers or taxes are applied is called market income.

Question 10

Earning a doctorate in environmental economics is an example of

Accepted Answer

Earning a doctorate in environmental economics requires a significant investment of time and resources. It is considered an investment in human capital, as it enhances one's skills and knowledge and increases their earning potential in the long-term.

Question 11

The demand for Alaskan fishermen is the same as the demand for deep-sea divers in Hawaii. The annual earnings of Alaskan fishermen is 30% higher than the earnings of Hawaiian deep-sea divers. What is a possible explanation for this?

Accepted Answer

The answer of The demand for Alaskan fishermen is the...

Question 12

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

Accepted Answer

Compensating differentials are differences in wages that are paid to offset the desirability (or undesirability) of a particular job. In option C, prison guards earn more than parole officers, but they also have a higher probability of being injured on the job. The higher salary compensates for the increased risk of injury. Options A and B do not demonstrate compensating differentials, as the differences in pay are not related to any specific job characteristics. Option D is not an example of a compensating differential at all, as it does not involve any wage differential.

Question 13

Recall the Economics in Practice on page 368: According to a study discussed in the Economics in Practice, when students were moved from a class taught by a below-average teacher to one at the 75th percentile, the move

Accepted Answer

The study discussed in the Economics in Practice found that when students were moved from a class taught by a below-average teacher to one at the 75th percentile, their future annual earnings increased by 3.5% per year.

Question 14

A perfectly equal distribution of income would result in a Gini coefficient of 1.

Accepted Answer

A perfectly equal distribution of income would result in a Gini coefficient of 0, as the Gini coefficient measures income inequality on a scale from 0 to 1, where 0 represents perfect equality and 1 represents perfect inequality.

Question 15

Professional female basketball players make far less income than do professional male basketball players. Why?

Accepted Answer

The demand for female basketball players is far less than the demand for male basketball players, leading to lower salaries for female players. This is not necessarily due to gender discrimination or compensating differentials, but rather a reflection of the level of interest and investment in women's basketball compared to men's basketball.

Question 16

A Gini coefficient of 0.1 represents more inequality in income distribution than a Gini coefficient of 0.9.

Accepted Answer

The Gini coefficient measures the level of inequality in income distribution, ranging from 0 (perfect equality) to 1 (perfect inequality). Therefore, a Gini coefficient of 0.9 represents more inequality than a Gini coefficient of 0.1.

Question 17

Earning a master's degree in Engineering is an example of

Accepted Answer

Earning a master's degree in Engineering is an investment in human capital, as it increases the individual's knowledge and skills, and therefore their future earning potential.

Question 18

Individuals with more experience tend to earn more than individuals with less experience. This is because

Accepted Answer

Experience on the job increases an individual's human capital, which makes them more productive and valuable to an employer. Employers are willing to pay higher wages to experienced workers because they can produce more output and generate more revenue for the company. This is why individuals with more experience tend to earn more than those with less experience. The other choices are not accurate or complete explanations.

Question 19

Households acquire property through

Accepted Answer

Households can acquire property through both savings, which allow them to purchase property directly, and inheritance, where property is passed down from previous generations.

Question 20

On-the-job-training is an example of

Accepted Answer

On-the-job training represents an investment in human capital since it is a way to improve workers' skills and knowledge, which can lead to higher productivity and wages in the future.

Quiz 18: Income Distribution and Poverty