Question 1

A signaling theory of education suggests that educational attainment

Accepted Answer

A signaling theory of education suggests that educational attainment is a signal of high marginal productivity, meaning that individuals who have a higher level of education are perceived by employers as having greater ability and potential productivity than those with lower levels of education. Additionally, educational attainment is correlated with natural ability, as individuals with higher natural ability are more likely to pursue and succeed in higher levels of education. Therefore, both choices A and B are correct in the context of the signaling theory of education. Option C, which suggests that education increases the productivity of low-ability workers, is not supported by the signaling theory of education.

Question 2

Which of the following theories explains why increased education translates into higher wages?

Accepted Answer

Human-capital theory states that education is an investment in an individual's skills, knowledge, and abilities. The more education and training an individual acquires, the more productive they become, and the more valuable their labor becomes to employers. This increased productivity and value translates into higher wages.

Question 3

The belief that education makes a person more productive and thereby raises his or her wage is referred to as the

Accepted Answer

The human-capital view of education asserts that education enhances a person's productivity and therefore increases their earnings. This view is based on the belief that education is an investment in an individual's human capital, which comprises their knowledge and skills, and that education increases an individual's potential for productivity and earnings in the future.

Question 4

Which of the following explains the "beauty premium" differences in wages?

Accepted Answer

People who spend time on their personal appearance may send a signal that they are more productive workers.

Question 5

Which of the following does not explain the "beauty premium" differences in wages?

Accepted Answer

Option C suggests that average-looking people are preferred by customers, which contradicts the general belief that better-looking people are preferred. Therefore, it does not explain the "beauty premium" differences in wages. Options A, B, and D can all contribute to the "beauty premium" phenomenon.

Question 6

Which of the following is not an explanation for why better educated workers earn more, on average, than less educated workers?

Accepted Answer

Option C suggests that skilled labor is increasingly becoming a substitute for unskilled labor, which raises the earnings of workers with more education. This is not a commonly cited explanation for why better educated workers earn more. A, B, and D are widely accepted explanations, suggesting that higher wages may be a compensating differential for the cost of acquiring education, workers with a college degree signal their higher abilities to potential employers, and better educated workers are more productive, on average.

Question 7

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

Accepted Answer

Human-capital theory states that education and training increase productivity and therefore wages for workers. This theory suggests that increasing education levels for all workers would lead to higher productivity and higher wages for all workers.

Question 8

Which of the following examples best describes the signaling theory of education?

Accepted Answer

The answer of Which of the following examples best describes...

Question 9

Of the theories listed below, which do the best job of explaining why educated people are paid more than uneducated people?

Accepted Answer

The theory of human-capital suggests that education and other forms of training increase the productivity of workers. However, this theory alone cannot account for the wage differential as it assumes perfect information and ignores the effect of signaling. The theory of signaling suggests that education signals to employers that the individual has desirable qualities such as intelligence and discipline, making them a better hire. Thus, the combination of these two theories provides the best explanation for why educated people are paid more than uneducated people.

Question 10

When employers sort employment applications into high-ability and low-ability people based on whether or not the applicant has a college degree (irrespective of major), they are providing evidence in support of the

Accepted Answer

The sorting of applicants based on having a college degree, irrespective of major, supports the signaling theory of education. This theory suggests that education serves as a signal to employers of an individual's competence, rather than solely providing them with additional skills and knowledge. Employers use college degrees as a way to identify individuals who possess certain qualities valued in the workplace, such as discipline, work ethic, and aptitude for learning. This sorting process can result in individuals with a college degree having a higher chance of being hired and earning higher wages, even if their degree is not directly related to the job requirements.

Question 11

George and Brad are waiters at a local restaurant. The female customers think that George is better looking than Brad. If George earns more than Brad, this could be an example of each of the following except

Accepted Answer

A compensating differential is a difference in wages that compensates for differences in working conditions or job characteristics, but in this case, the difference in wages is not due to working conditions or job characteristics, but rather customer preferences or discrimination based on physical appearance. The other choices could all be potential explanations for why George earns more than Brad based on the information provided.

Question 12

The human-capital theory explanation for why people invest in education has been challenged by a theory that suggests

Accepted Answer

The theory that challenges the human-capital theory suggests that schooling acts only as a signal of ability, rather than directly increasing productivity and earning potential.

Question 13

Which of the following statements is not correct?

Accepted Answer

The statement in option C is incorrect. According to the human capital theory, additional schooling increases the productivity and skills of workers, which in turn increases their wages. Therefore, a policy that pays for additional schooling for all workers would increase wages according to this theory. Option A and B are correct and options D is true as well.

Question 14

The "beauty premium" can be explained by the fact that

Accepted Answer

Research suggests that physical appearance can affect an individual's job prospects and earning potential in some occupations, as it may enhance the value of their marginal product. This is known as the "beauty premium."

Question 15

Suppose that a college student receives an offer for a summer internship with a stock brokerage firm. Unfortunately for the student, the internship is unpaid. Is it ever economically beneficial to accept an unpaid job?

Accepted Answer

Accepting an unpaid job can be economically beneficial if it provides valuable experience and skills that increase the individual's future earning potential. This is known as investing in human capital. While there may be a short-term opportunity cost in terms of forgoing paid work, the long-term benefits of increased employability and earning potential can outweigh this cost.

Question 16

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

Accepted Answer

All of the given options could explain the beauty premium found by Hamermesh and Biddle. Good looks may be an innate ability for some jobs, resulting in higher productivity and higher wages. Good looks may be an indirect measure of other types of ability such as attention to detail. Additionally, if employers pay better-looking people more than average-looking people, then employers may be discriminating based on personal appearance.

Question 17

George and Brad are waiters at a local restaurant. The female customers prefer to be seated at the tables that George waits on because they think George is better looking than Brad. If George earns more than Brad because of his better looks, this is an example of

Accepted Answer

The situation described is an example of a beauty premium, which is a type of wage differential based on physical attractiveness. It is not related to effort or human capital, and it is not a compensating differential which is a wage increase to compensate for working in undesirable conditions.

Question 18

According to the human-capital view, education

Accepted Answer

According to the human-capital view, education enhances productivity. This means that individuals who have more education are considered to be more capable of producing valuable outputs in the workplace. Therefore, education is seen as an investment in an individual's skills and abilities, which can lead to increased productivity and higher earnings over their lifetime.

Question 19

Dan and Dave are both college graduates. Dan is a patrolman and Dave is a detective in the same police precinct. While Dan's job is inherently more dangerous than Dave's, Dave passed a difficult exam to gain promotion to detective. Dave earns more than Dan because

Accepted Answer

Dave's passing of a difficult exam to gain promotion to detective indicates that he has more human capital (knowledge, skills, and experience) than Dan. This higher level of human capital allows Dave to perform the higher-skilled work of a detective and therefore command a higher wage. The difference in danger between their jobs is not relevant to explaining the wage differential. Efficiency wages and education as a signal are not relevant to this scenario.

Question 20

Which of the following is an economic explanation for the "beauty premium"?

Accepted Answer

The economic explanation for the "beauty premium" is that employers pay above-average-looking women more than average-looking women because customers prefer to deal with better-looking women. This preference may lead to higher sales or better customer satisfaction, leading employers to place a premium on attractiveness in certain jobs.

Quiz 19: Earnings and Discrimination