Question 1

Which is NOT an explanation for the gender wage gap?
A)occupational choices
B)differences in willingness to take part-time work
C)differences in overall capabilities
D)human capital

Accepted Answer

Occupational choices, differences in willingness to take part-time work, and human capital are all factors that can contribute to the gender wage gap. However, differences in overall capabilities are not a valid explanation as there is no evidence to suggest that men are inherently more capable than women.

Question 2

Arthur and Robert have the same educational background. Both have been firemen in Atlanta for 10 years. Arthur works from 11 P.M. until 7 A.M., and Robert works from 7 A.M. until 3 P.M. Arthur's salary is $800 per month higher than Robert's salary. The wage disparity in this case is due to:
A) efficiency wages.
B) market power.
C) compensating differentials.
D) discrimination.

Accepted Answer

The wage disparity in this case is due to compensating differentials as the two workers have the same educational background and work in the same industry but have different working hours. Arthur works during the night shift, which may be less desirable due to its impact on sleep and daily routines, resulting in a higher salary to compensate for the inconvenience. This difference in pay is not due to efficiency wages or discrimination since both workers have the same educational background and experience. It is also not due to market power as there is no evidence of either worker having an advantage in negotiating their wages with their employer.

Question 3

Wage differentials can be partially explained by which factor(s)?
I. differences in talent
II. different amounts of human capital
III. compensating differentials
A)I only
B)I and II only
C)III only
D)I, II, and III

Accepted Answer

Wage differentials can be explained by differences in talent, different amounts of human capital, and compensating differentials. Talent affects productivity and thus wages; human capital, such as education and experience, directly impacts earnings; and compensating differentials refer to wage differences required to attract employees to jobs with varying characteristics (e.g., risk, desirability).

Question 4

Which statement describes a compensating differential?
A)Tom Brady is paid more than a college professor.
B)A window washer in the suburbs is paid less than a window washer who washes the windows of skyscrapers.
C)A college professor is paid more than a janitor working in the same building.
D)On average, men are paid more than women.

Accepted Answer

A compensating differential refers to the difference in wages paid to individuals for jobs that require different levels of inconvenience, risk, or non-monetary benefits. In this case, the window washer who washes the windows of skyscrapers is likely facing more risk and inconvenience compared to the one who washes windows in the suburbs, hence the difference in wages.

Question 5

A skilled craftsperson often makes more than an apprentice because of:
A)discrimination.
B)differences in human capital.
C)efficiency wages.
D)differences in physical capital.

Accepted Answer

Differences in human capital refer to differences in skills, knowledge, and experience that individuals acquire through education, training, and on-the-job experience. An apprentice is typically less experienced and skilled than a craftsperson, which is why the latter often earns more. Discrimination and physical capital are not relevant factors in this scenario, and while efficiency wages may play a role in some situations, they are not the primary reason for the wage differential between apprentices and craftspersons.

Question 6

Deep Springs College is a small college in California with fewer than 50 students at any given time. The college employs two professors to teach liberal arts courses. Edwin has been employed by the college for 15 years, and Nabil has been employed for 1 year. Edwin's salary is significantly higher than Nabil's, although both have doctoral degrees in English literature. Each professor averages one publication per year, and both are excellent teachers. Given this information, the wage difference is BEST explained by:
A)compensating differentials.
B)differences in human capital.
C)discrimination.
D)differences in talent.

Accepted Answer

The wage difference is best explained by differences in human capital, as Edwin has significantly more experience (15 years vs. 1 year) at the college, which likely contributes to his higher salary despite similar educational backgrounds and productivity.

Question 7

Efficiency wages may cause a _____ of labor because they _____ the equilibrium wage.
A)shortage; fall below
B)surplus; fall below
C)shortage; exceed
D)surplus; exceed

Accepted Answer

Efficiency wages cause a surplus of labor because they are set above the equilibrium wage, attracting more workers than there are jobs available.

Question 8

Suppose that Nabil wants to pay efficiency wages to help in the redesign of his basement. If the prevailing wage rate for electricians is $76 per hour in his area, one possible efficiency wage he could pay would be:
A)$72.
B)$76.
C)$88.
D)the minimum wage.

Accepted Answer

Efficiency wage is the wage rate paid by the employer which is higher than the market equilibrium wage rate in order to motivate employees to work more efficiently. Since Nabil wants electricians to work efficiently in redesigning his basement, he may offer them an efficiency wage.

Out of the given options, the prevailing market wage rate is $76 per hour. If Nabil pays the same wage rate as the market, there may not be enough motivation for the electricians to work more efficiently. Therefore, options A and B can be ruled out.

On the other hand, option D (minimum wage) is the least wage rate that an employer can pay its employees. This is not an appropriate wage rate to offer as an efficiency wage as it is significantly less than the prevailing market wage rate.

Option C ($88) is higher than the market wage rate and provides an incentive for the electricians to work more efficiently. Therefore, the best choice would be C as it meets the criteria for an efficiency wage.

Question 9

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 differentials.
B) differences in ability and talent.
C) differing levels of human capital.
D) occupational choice.

Accepted Answer

The wage disparity is due to compensating differentials, which refers to the difference in wages offered to compensate for the desirability or undesirability of a job, such as the less desirable hours Holly works compared to Emily.

Question 10

A(n) _____ is higher than the equilibrium wage in order to motivate the employee to work hard.
A)real wage
B)permanent income
C)nominal wage
D)efficiency wage

Accepted Answer

An efficiency wage is a wage that is set higher than the equilibrium wage in order to motivate employees to work harder and be more productive. By offering a higher wage, employers hope to attract and retain the best workers and increase their overall output. This can be particularly effective in industries where employee productivity is difficult to measure or incentivize in other ways.

Question 11

In economics, _____ is (are) used to motivate employees and to reduce worker turnover.
A)efficiency wages
B)ability and talent
C)experience as a form of human capital
D)choice of occupation

Accepted Answer

Efficiency wages are higher than market wages and are used to incentivize employees to work harder and reduce worker turnover. This occurs because employees will be motivated to maintain their higher-paying jobs and will work harder to avoid being fired. Ability, talent, and experience are all important factors in determining an employee's productivity and market value, but they do not necessarily motivate employees or reduce turnover on their own. Choice of occupation is also important in determining an employee's market value but is not directly linked to motivation or turnover.

Question 12

Suppose that two fire fighters are identical in every way, except that one of them is employed in Chicago, a metropolis of 5 million people, and the other is employed in Clarksville, Tennessee, a city of 100,000 people. Which fire fighter is likely to receive the higher wage? What is a likely source of this wage differential?

Accepted Answer

The answer of Suppose that two fire fighters are identical...

Question 13

David and Carolina are married with four children. Both have college degrees, but Carolina has chosen not to enter the labor force, while David has worked continuously for 10 years. Suppose that Carolina obtains a job with David's employer and is offered a salary that is $15,000 less than David's. Is Carolina being discriminated against because she is a woman? Support the answer.

Accepted Answer

The answer of David and Carolina are married with four...

Question 14

With the existence of a minimum wage, one would expect:
A)involuntary unemployment.
B)the equilibrium wage to rise.
C)there to be a job for everyone who is willing to work.
D)business owners to hire the same number of workers as before but at the higher wage.

Accepted Answer

A minimum wage set above the equilibrium wage can lead to involuntary unemployment because employers may not be willing to hire as many workers at the higher wage, leading to a surplus of workers at that wage level.

Quiz 12: Wages, Workers, and Management

Which is NOT an explanation for the gender wage gap?

Arthur and Robert have the same educational background. Both have been firemen in Atlanta for 10 years. Arthur works from 11 P.M. until 7 A.M., and Robert works from 7 A.M. until 3 P.M. Arthur's salary is $800 per month higher than Robert's salary. The wage disparity in this case is due to:

Wage differentials can be partially explained by which factor(s) ? I. differences in talent II. different amounts of human capital III. compensating differentials

Which statement describes a compensating differential?

A skilled craftsperson often makes more than an apprentice because of:

Efficiency wages may cause a _ of labor because they _ the equilibrium wage.

Suppose that Nabil wants to pay efficiency wages to help in the redesign of his basement. If the prevailing wage rate for electricians is $76 per hour in his area, one possible efficiency wage he could pay would be:

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(n) _____ is higher than the equilibrium wage in order to motivate the employee to work hard.

In economics, _____ is (are) used to motivate employees and to reduce worker turnover.

With the existence of a minimum wage, one would expect: