Question 1

One of the problems with calculating the true amount of discrimination that takes place in the market for labor is

Accepted Answer

Measuring productivity differences between workers is difficult because there are many unobservable factors that can impact productivity, such as work ethic, experience, and natural ability. These factors can make it hard to determine if wage differentials are due to discrimination or differences in productivity.

Question 2

The fact that wage differentials continue to exist across different groups of workers leads economists to believe that

Accepted Answer

Differences in human capital (education, training, experience) and job characteristics (such as risk, responsibility, and demand) are important in explaining wage differentials across different groups of workers. If differences in human capital and job characteristics did not matter, then wages across different groups of workers would converge, but this is not the case in reality. This suggests that people with different levels of education or experience, or who work in different industries, have different productivities or supply and demand conditions, which affect their wages. Discrimination or market failures could also be factors, but differences in human capital and job characteristics are generally considered to be the primary explanation.

Question 3

Empirical work that does not account for differences in the productivities of workers

Accepted Answer

If empirical work does not account for differences in the productivity of workers, it may incorrectly attribute wage differentials to discrimination instead of productivity differences. This can lead to a misinterpretation of evidence of labor market discrimination. Therefore, choice C is the correct answer. Choices A, B, and D are incorrect because they do not accurately reflect the potential consequences of not accounting for differences in worker productivity.

Question 4

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4.If consumers do not discriminate between bald barbers and barbers with hair,then

Accepted Answer

If consumers do not discriminate between the two groups of barbers, then there is no reason for the wage differential to be maintained. Therefore, barbershops that hire bald barbers will be just as profitable as those that hire barbers with hair. As a result, the market will adjust to equalize the wages in both markets, and the equilibrium wage for both groups of barbers will be the same.

Question 5

Economists are skeptical that discrimination is employer driven because (i)	employers are not really interested in maximizing profit.
(ii)	holding productivity constant,a profit-maximizing employer will hire the cheapest labor available.
(iii)	discrimination cannot exist in markets.

Accepted Answer

Economists are skeptical that discrimination is employer driven because holding productivity constant, a profit-maximizing employer will hire the cheapest labor available, regardless of demographic factors such as race, gender, or religion. Therefore, answer choice (ii) is the most accurate statement. Answer choice (i) is incorrect as profit maximization is a core goal of most employers. Answer choice (iii) is also incorrect as discrimination can exist in markets, as evidenced by studies showing wage disparities between different demographic groups.

Question 6

Scenario 19-5
Billy works for the local piano moving company part-time after school. Billy has worked for the company for two years but still hasn't received a wage increase, even though newer employees have received raises. Billy has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Billy believes he is a victim of labor-market discrimination.
-Refer to Scenario 19-5.In a competitive market for piano movers,why might Billy's wage differential persist?

Accepted Answer

The answer of Scenario 19-5
Billy works for the local piano...

Question 7

Attributing the gender wage gap to ongoing discrimination by employers will likely be incorrect because

Accepted Answer

Although discrimination may play a role in the gender wage gap, other factors such as differences in work experience, education, and occupational choice also contribute. Efficiency wages, which are wages above the market equilibrium that incentivize workers to be more productive, can also explain some of the gap. Compensating differentials, which are wage differences that reflect the undesirable aspects of a job (such as dangerous working conditions), can sometimes lead to higher wages for women. Therefore, it would be incorrect to attribute the entire wage gap to discrimination. Out of the given choices, option B is the most relevant as it highlights a key factor contributing to the wage gap.

Question 8

Regarding the possibility of labor-market discrimination,a consensus view among economists is that

Accepted Answer

While some wage differences may be due to discrimination, the consensus view among economists is that wage differences alone are not enough to determine whether or not discrimination is taking place. Other factors, such as differences in human capital and compensating differentials, must also be considered. Therefore, the most accurate statement is that wage differences among groups are not sufficient by themselves to determine how much discrimination there is.

Question 9

In what way do competitive markets have a "natural remedy" for discriminatory hiring practices?

Accepted Answer

In competitive markets, profit-maximizing firms that do not discriminate tend to replace firms that discriminate. Discrimination results in a loss of potential profits for firms as they may overlook qualified candidates solely based on characteristics such as race or gender. This creates an incentive for firms to hire the most qualified candidates, regardless of their background, in order to increase their profits and remain competitive in the market. Therefore, discriminatory firms are naturally replaced by non-discriminatory firms in competitive markets.

Question 10

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4.If consumers do not discriminate between bald barbers and barbers with hair,then

Accepted Answer

If consumers do not discriminate between bald and nonbald barbers, then they will choose to patronize whichever barber has the lowest price for haircuts of the same quality. This will create competitive pressure in both markets and eventually drive the equilibrium wage in the bald barber market up and the equilibrium wage in the nonbald market down until they are equal.

Question 11

Business owners who care only about making money are

Accepted Answer

Business owners who only care about making money are more likely to focus on hiring the best employees regardless of their race, gender, or other non-job related factors. This gives them an advantage in competing against businesses that practice discrimination, as they are able to hire from a larger pool of qualified candidates. While it is still important for businesses to address and prevent discrimination, prioritizing profits can sometimes lead to more equitable and diverse hiring practices.

Question 12

Given that the median male is better paid than the median female,which of the following is not a valid explanation for wage differences?

Accepted Answer

All the options provided can be valid explanations for wage differences, including compensating differentials, differences in human capital, and discrimination. Therefore, none of them can be ruled out as a possible partial explanation.

Question 13

Scenario 19-5
Billy works for the local piano moving company part-time after school. Billy has worked for the company for two years but still hasn't received a wage increase, even though newer employees have received raises. Billy has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Billy believes he is a victim of labor-market discrimination.
-Refer to Scenario 19-5.Which of the following statements would weaken Billy's case against his employer?

Accepted Answer

The answer of Scenario 19-5
Billy works for the local piano...

Question 14

Scenario 19-5
Billy works for the local piano moving company part-time after school. Billy has worked for the company for two years but still hasn't received a wage increase, even though newer employees have received raises. Billy has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Billy believes he is a victim of labor-market discrimination.
-Refer to Scenario 19-5.Why might an economist be skeptical of Billy's discrimination complaint?

Accepted Answer

An economist might be skeptical of Billy's discrimination complaint because in a competitive labor market, employers pay employees based on their value to the firm rather than their personal characteristics such as age, gender, or ethnicity. Therefore, if Billy has not received a wage increase, it could be because he hasn't demonstrated enough value for the company to justify a raise, rather than due to discriminatory practices.

Question 15

According to evidence provided by the U.S.government,the median black

Accepted Answer

According to the evidence provided by the U.S. government, the median black man is paid 22 percent less than the median white man. Therefore, option C is the correct answer. Option A is incorrect because it states that the median black woman is paid roughly the same as the median white woman, which is not mentioned in the evidence. Option B is also incorrect because the evidence specifically states the median black man, not the median black woman.

Question 16

Which of the following can be used to help explain wage differences among different groups of workers?

Accepted Answer

All of the above factors can contribute to wage differences among different groups of workers. Human capital acquired through education and job experience can lead to higher wages, as can compensating differentials that reflect the desirability or difficulty of particular jobs or industries.

Question 17

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4.Competition in the market for haircuts is consistent with which of the following statements?

Accepted Answer

In a competitive market for haircuts, firms hiring bald barbers will be able to offer haircuts at a lower price due to the lower wage rate for bald barbers. This will lead to an increase in the demand for haircuts from bald barbers, leading to an increase in the demand for bald barbers themselves. As a result, more firms may enter the market and hire bald barbers to take advantage of the lower wage rate, further increasing the demand for bald barbers.

Question 18

Why would a wage differential due to discrimination be unlikely to persist in a competitive labor market? (i)	Workers who are victims of discrimination will eventually drop out of the labor market.
(ii)	Competing firms will hire more of the workers who are temporarily victimized by discrimination.
(iii)	There is a cost advantage for firms that do not discriminate.

Accepted Answer

In a competitive labor market, firms that do not discriminate can hire equally skilled workers at lower wages, gaining a cost advantage. Competing firms will hire more of the discriminated workers, reducing the wage differential.

Question 19

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4.If some consumers in the market for haircuts have a strong preference for having their hair cut by a barber who is not going bald,then

Accepted Answer

If some consumers have a strong preference for barbers with hair, then barbershops that hire barbers with hair will have a competitive advantage and be able to charge a higher price for a haircut to those consumers. This may lead to an increase in the equilibrium wage in the non-bald barber market and a decrease in the wage in the bald barber market, but the difference in wages may not necessarily disappear completely since a haircut is not a completely homogeneous good (e.g. some consumers may prefer a particular barber's style, personality, etc.). The profitability of barbershops will depend on various factors such as their location, pricing strategy, customer base, etc.

Question 20

Which of these instances would constitute labor-market discrimination? Annette receives a higher wage than Justin.Annette and Justin are identical in all of their labor-market characteristics except that

Accepted Answer

The only instance that would constitute labor-market discrimination is if Annette receives a higher wage than Justin solely based on gender (Annette is a woman, and Justin is a man). The other instances are variations in education level and experience, which could potentially justify differences in wages.

Quiz 19: Earnings and Discrimination