Ch 19 Earnings and Discrimination

A compensating differential does not refer to a difference in wages that arises from nonmonetary characteristics. True False

False

Differences in average wages between men and women provide conclusive evidence of discrimination in the labor market. True False

False

Discrimination by employers is a profit-maximizing strategy. True False

False

If people with blonde hair earn more than people with brown hair, we have proof of discrimination against people with brown hair. True False

False

The human capital theory of education suggests that completing a college degree signals employers about worker abilities. True False

False

The superstar phenomenon explains why plumbers are increasingly becoming superstars. True False

False

Why is a professional athlete likely to earn much more than a successful electrician? a.An electrician can provide services to only a limited number of customers. b.Technological progress has advanced less in the electrical industry than in sports training. c.Compensating differentials create a higher wage for professional athletes. d.Productivity levels are low in the electrical industry due to the high number of people willing to be electricians.

a.An electrician can provide services to only a limited number of customers.

Which of the following is not a reason why workers may earn above-equilibrium wages? a.Labor-market discrimination. b.Efficiency wages. c.Labor unions. d.Minimum wage.

a.Labor-market discrimination.

Katie and Olivia each work for a software company. Each has identical training and education. Katie sells software at the home office, but Olivia must travel to sell the software. Katie earns $85,000 and Olivia earns $95,000. Select the best explanation for the difference in income. a.Olivia is compensated more to account for the unpleasant nature of travel. b.Olivia has more human capital than Katie. c.Olivia puts in less effort than Katie. d.Olivia is a union member and Katie is not.

a.Olivia is compensated more to account for the unpleasant nature of travel.

Which of the following does not explain differences in wages among workers? a.Shoe color b.Job characteristics c.Experience d.Ability

a.Shoe color

A night security officer at a bank has a relatively high wage. Which of the following would make the wage increase? a.The job has an increased risk of physical injury. b.The job becomes easier. c.The job no longer requires specialized skills. d.The job becomes more exciting.

a.The job has an increased risk of physical injury.

Which of the following is considered a form of human capital? a.The skills acquired for hitting through batting practice. b.The baseball glove used by a baseball player. c.The baseball bat used by the baseball player. d.The baseball helmet used by a baseball player.

a.The skills acquired for hitting through batting practice.

Security guards, with similar skills and training, earn more money working the night shift than counterparts working during the day. This difference in pay is referred to as a a.compensating differential. b.wage inequality. c.discriminatory wage practice. d.market inefficiency.

a.compensating differential.

Business owners in competitive markets are generally a.more interested in making a profit than in discriminating against a particular group. b.more interested in discrimination than in making a profit. c.unable to determine the link between discrimination and profitability. d.interested in profits only when discrimination is illegal.

a.more interested in making a profit than in discriminating against a particular group.

Other things equal, we'd expect a more dangerous job to pay a.more; this is known as a compensating wage differential. b.less; this is known as a compensating wage differential. c.less; this is known as an efficiency wage. d.more; this is known as an efficiency wage.

a.more; this is known as a compensating wage differential.

The most unlikely reason why women tend to be underrepresented in the economics profession is because of a.the inability of women to solve problems in economics. b.the choice of women to select other occupations. c.cultural bias in primary and secondary education. d.labor market discrimination.

a.the inability of women to solve problems in economics.

Ability, effort and chance a.while difficult to measure, are likely to be important factors in explaining variation in wages. b.while difficult to measure, are likely to be unimportant factors in explaining variation in wages. c.while easily measurable, are likely to be unimportant factors in explaining variation in wages. d.while easily measurable, are likely to be important factors in explaining variation in wages.

a.while difficult to measure, are likely to be important factors in explaining variation in wages.

Employers might consider paying workers an efficiency wage because a.workers will have an incentive to work harder and be more productive. b.workers will receive wages specific to compensating differentials. c.employers will find it profitable to hire more workers. d.workers will want to avoid receiving compensating differentials.

a.workers will have an incentive to work harder and be more productive.

Which of the following statements is correct? a.The superstar phenomenon explains why less talented entertainers earn more than more talented entertainers. b.Discrimination by employers does not affect the marginal productivity of workers. c.The signaling theory of education suggests that more education makes workers more productive. d.Compensating differentials reflect different skills of workers.

b.Discrimination by employers does not affect the marginal productivity of workers.

Wages for garbage collectors tend to be higher than wages for retail cashiers. Which of the following is a compensating differential explanation for the difference in wages? a.Garbage collectors and retail cashiers require the same amount of education. b.Garbage collectors work in dirty environments while retail cashiers work in comfortable, climate controlled stores. c.Garbage collectors work in clean conditions while retail cashiers tend to work in dirty environments. d.Garbage collectors work in comfortable conditions while retail cashiers work in hazardous business environments.

b.Garbage collectors work in dirty environments while retail cashiers work in comfortable, climate controlled stores.

Which of the following explains differences in wages as a result of different levels of educational attainment? a.Racial discrimination. b.Investment in human capital. c.Gender discrimination. d.Compensating differentials.

b.Investment in human capital.

Which of the following is not correct? a.The theory of compensating wage differentials explains differences in wages as a result of dangerous working conditions. b.The efficiency wage theory suggests that firms pay equal wages to all workers regardless of gender or race. c.Discrimination against workers of a certain race or ethnicity is often in conflict with a firm's desire to maximize profits. d.Signaling theory explains why additional schooling does not affect worker productivity but rather signals a correlation between natural ability and education.

b.The efficiency wage theory suggests that firms pay equal wages to all workers regardless of gender or race.

Which of the following is considered a form of human capital? a.The caddy used by a professional golfer during a tournament. b.The skills a professional golfer has gained through practice and working with other golfers. c.The golf clubs a professional golfer uses to play golf. d.The golf shoes a professional golfer uses to play golf.

b.The skills a professional golfer has gained through practice and working with other golfers.

An offshore oil rig worker is exposed to a much more dangerous work environment than a public librarian. As a result, we would expect a difference in wages between the two jobs. The difference is known as a.a minimum wage. b.a compensating differential. c.an efficiency wage. d.a wage adjustment.

b.a compensating differential.

Less than half of the variation in wages in our economy can be explained by measurable economic variables. Therefore, variables that are difficult to measure, like ability, effort, and chance a.are not likely to explain any of the variation in wages. b.are likely to be important factors in examining variation in wages. c.are likely to be unimportant factors in examining variation in wages. d.are likely to explain very little of the variation in wages.

b.are likely to be important factors in examining variation in wages.

Economists believe that differences in wages by gender and racial groups a.cannot be measured because no reliable data exists. b.can partially be explained by discrimination. c.can fully be explained by discrimination. d.cannot be explained by discrimination.

b.can partially be explained by discrimination.

The existence of differences in wages by gender suggests a.the market has failed to properly allocate wages to different workers. b.differences in human capital and job characteristics must be important in explaining the differences in wages. c.firms apparently are not profit maximizers. d.discrimination by customers is the most common type of economic discrimination.

b.differences in human capital and job characteristics must be important in explaining the differences in wages.

The existence of differences in wages by race suggests a.the market has failed to properly allocate wages to different workers. b.differences in human capital and job characteristics must be important in explaining the differences in wages. c.firms apparently are not profit maximizers. d.discrimination by customers is the most common type of economic discrimination.

b.differences in human capital and job characteristics must be important in explaining the differences in wages.

Other things equal, highly-educated workers may earn higher wages than less-educated workers because a.less-educated workers have similar amounts of investment in human capital comparative to high-educated workers. b.highly-educated workers have a greater investment in human capital. c.less-educated workers have a greater investment in human capital. d.highly-educated workers have a smaller investment in human capital.

b.highly-educated workers have a greater investment in human capital.

A female worker with a graduate degree earns more than a male co-worker with a college degree. The extra education makes her more productive. The difference in earnings can be explained by a.racial discrimination. b.investment in human capital. c.compensating differentials. d.gender discrimination.

b.investment in human capital.

Other things equal, we'd expect a less dangerous job to pay a.more; this is known as a compensating wage differential b.less; this is known as a compensating wage differential. c.less; this is known as an efficiency wage. d.more; this is known as an efficiency wage.

b.less; this is known as a compensating wage differential.

A local factory employs workers in a day shift and night shift. Workers in both shifts have identical skills, training, and education. Workers prefer working the day shift. Compensating differentials would predict that a.no workers would want to work on the day shift. b.night shift workers earn more than day shift workers. c.night shift workers earn less than day shift workers. d.night shift workers earn the same as day shift workers.

b.night shift workers earn more than day shift workers.

A logical deterrent to employer discrimination in labor markets is the a.union movement. b.profit motive. c.political process. d.threat of judicial review.

b.profit motive.

When a job application requires an applicant to have a college degree, they are providing evidence in support of the a.principle that most business owners are more interested in discriminating against a particular group than in maximizing profits. b.signaling theory of education. c.human-capital theory of education. d.principle that education reduces marginal productivity.

b.signaling theory of education.

Discrimination occurs in the labor market when a.wage rates are different for more dangerous jobs. b.wages of individuals are different on the basis of some recognizable attribute that is unrelated to productivity. c.consumers prefer to shop at some stores, and not at others. d.wage rates differ across workers with different levels of human capital.

b.wages of individuals are different on the basis of some recognizable attribute that is unrelated to productivity.

Sales based commissions reward a.years of experience. b.work effort. c.loyalty to the firm. d.years of education.

b.work effort.

Which of the following is not an example of a compensating differential? a.Police officers who receive hazardous duty pay. b.An emergency room doctor who earns more because of the added stress of the job. c.A retail manager who receives a scheduled annual raise similar to other workers with the same job and tenure. d.An offshore oil rig worker who earns hazard pay.

c.A retail manager who receives a scheduled annual raise similar to other workers with the same job and tenure.

Which of these would be an example of labor-market discrimination assuming Andrew has a higher wage than Jake? Assume Andrew and Jake have identical characteristics except for the ones listed. a.Andrew's work performance is better than Jake. b.Andrew has 5 years of experience and Jake has 1 year of experience. c.Andrew is white and Jake is black. d.Andrew is a college graduate and Jake is a high school graduate.

c.Andrew is white and Jake is black.

Which of the following is not correct? a.The theory of compensating wage differentials explains differences in wages as a result of dangerous working conditions. b.The efficiency wage theory suggests that firms pay higher wages to workers in order to induce workers to be more productive. c.Discrimination against workers of a certain race is often in-line with a firm's desire to maximize profits. d.Signaling theory explains why additional schooling does not affect worker productivity but rather signals a correlation between natural ability and education.

c.Discrimination against workers of a certain race is often in-line with a firm's desire to maximize profits.

Which of the following would explain why a male worker would earn more than a female worker if the workers have the same education, skills, and level of ability? a.Racial Discrimination. b.Investment in human capital. c.Gender discrimination. d.Compensating differential.

c.Gender discrimination.

Which of these would be an example of labor-market discrimination assuming Josh has a higher wage than Julie? Assume Josh and Julie have identical characteristics except for the ones listed. a.Josh's work performance is objectively better than Julie's. b.Josh has 8 years of experience and Julie has 5 years of experience. c.Josh is male and Julie is female. d.Josh is a college graduate and Julie is a high school graduate.

c.Josh is male and Julie is female.

Which of the following is considered a form of human capital? a.The car used by the insurance adjuster to go to the scene of the incident. b.Computer used by the insurance adjuster. c.On-the-job training for an insurance adjuster. d.The office space used by the insurance adjuster.

c.On-the-job training for an insurance adjuster.

Park Rangers are paid noticeably less than workers with similar skills and education. This is probably because a.Park rangers consider working outside as boring. b.Park rangers require a lot of education. c.Park rangers enjoy working at national parks. d.Park rangers do not enjoy working at national parks.

c.Park rangers enjoy working at national parks.

Which of the following is not considered a form of human capital? a.The experience gained from attending a cooking workshop. b.The skills learned by a chef through a cooking course. c.The ingredients a chef uses to prepare a meal. d.The knowledge acquired by a chef through an apprenticeship.

c.The ingredients a chef uses to prepare a meal.

Customer discrimination is legal in the United States. True False

True

It is legal in the United States for firms to pay different employees different wages for doing the same job. True False

True

NBA players are paid more than developmental league players because of differences in natural ability. True False

True

The fact that cashiers earn more in a less desirable location than cashiers in a more desirable location is an example of a compensating differential. True False

True

The fact that night shift factory workers earn more than day shift factory workers is an example of a compensating differential. True False

True

The human-capital theory of education suggests that workers with more education are more productive. True False

True

Union workers earn about 10 to 20 percent higher wages than similar, nonunion workers perhaps because they can threaten to strike. True False

True

If there is an increase in the minimum wage, which of the following is likely to occur in the market for minimum wage workers? a.The quantity of labor supplied of minimum wage workers should decrease and the quantity of labor demanded of minimum wage workers should increase. b.The quantity of labor supplied of minimum wage workers should increase and the quantity of labor demanded of minimum wage workers should increase. c.The quantity of labor supplied of minimum wage workers should increase and the quantity of labor demanded of minimum wage workers should decrease. d.The quantity of labor supplied of minimum wage workers should decrease and the quantity of labor demanded of minimum wage workers should decrease.

c.The quantity of labor supplied of minimum wage workers should increase and the quantity of labor demanded of minimum wage workers should decrease.

Which of the following statements is correct? a.The superstar phenomenon explains why less talented entertainers earn more than more talented entertainers. b.Discrimination by employers affects the marginal productivity of workers. c.The signaling theory of education suggests that completing a degree signals to employers natural abilities of applicants. d.Compensating wage differentials reflect different skills of workers.

c.The signaling theory of education suggests that completing a degree signals to employers natural abilities of applicants.

A local community is experiencing an increased rate of bank robberies. Assuming everything else is constant, which of the following is true with respect to wages for bank security officers? a.Wages should not change as a result of more bank robberies in the area. b.Wages are expected to decrease as a result of increased danger on the job. c.Wages are expected to increase as a result of increased danger on the job. d.Wages are expected to increase as a result of the security job becoming easier.

c.Wages are expected to increase as a result of increased danger on the job.

Statistical studies that do not examine differences in productivity among workers a.are accepted as superior to statistical work that does examine differences in productivity among workers. b.can provide strong evidence of labor market discrimination. c.are likely to misinterpret apparent evidence of labor market discrimination. d.are unlikely to find evidence of wage differentials.

c.are likely to misinterpret apparent evidence of labor market discrimination.

NBA basketball players get paid better than developmental league basketball players because of a.gender discrimination. b.higher levels of educational attainment. c.greater abilities. d.compensating differentials.

c.greater abilities.

Other things equal, the earnings gap between high school graduates and college graduates a.has never between documented by reliable methods. b.has decreased over the last several years. c.has increased over the last several years. d.has remained the same over the last several years.

c.has increased over the last several years.

Finding examples of discrimination in labor markets a.is more easily identified on the basis of race than gender. b.is conclusively identified by large differences in average wage rates between men and women. c.is difficult to verify by reference to differences in average wage rates. d.applies only to race and gender.

c.is difficult to verify by reference to differences in average wage rates.

All else being equal, a more dangerous job will pay a.less because of the marginal product of labor. b.less because of diminishing marginal returns. c.more because of a compensating differential. d.more because of the marginal product of capital.

c.more because of a compensating differential.

If men, on average, earn 15% more than women in a particular occupation, a.the difference in average wages can be completely explained by gender discrimination. b.this is clear evidence of non-discrimination. c.the difference in average wages can be partially explained by differences in education, levels of human capital and possibly gender discrimination. d.this is clear evidence of discrimination.

c.the difference in average wages can be partially explained by differences in education, levels of human capital and possibly gender discrimination.

A________ is a worker organization that bargains with employers over wages and working conditions that usually results in workers earning ______________. a.strike; 10 to 20 percent more than similar nonunion workers b.union; an equilibrium wage c.union; 10 to 20 percent more than similar nonunion workers d.strike; the minimum wage

c.union; 10 to 20 percent more than similar nonunion workers

Which of the following describes signaling theory? a.A theory that suggests a college degree makes workers more productive. b.A theory that suggests more experience makes workers more productive. c.A theory that suggests more education makes workers more productive. d.A theory that suggests more education does not increase productivity but successful individuals are likely to have more education.

d.A theory that suggests more education does not increase productivity but successful individuals are likely to have more education.

Which of the following explains differences in wages as a result of some jobs being inherently more risky than others? a.Racial discrimination. b.Investment in human capital. c.Gender discrimination. d.Compensating differentials.

d.Compensating differentials.

Which of the following statements is correct? a.The superstar phenomenon explains why less talented entertainers earn more than more talented entertainers. b.Discrimination by employers affects the marginal productivity of workers. c.The signaling theory of education suggests that more education makes workers more productive. d.Compensating wage differentials reflect jobs with different risk attributes.

d.Compensating wage differentials reflect jobs with different risk attributes.

Which of the following is not correct? a.The theory of compensating wage differentials explains differences in wages as a result of dangerous working conditions. b.The efficiency wage theory suggests that firms pay higher wages to workers in order to induce workers to be more productive. c.Discrimination against workers of a certain race or ethnicity is often in conflict with a firm's desire to maximize profits. d.Signaling theory explains why people with more education are more productive than people with less education and consequently have higher wages.

d.Signaling theory explains why people with more education are more productive than people with less education and consequently have higher wages.

Underwater welders are known to have high wages and work on average a fraction of a 40 hour work week. Which of the following would push the wages for underwater welders higher? a.The job does not require specialized training. b.The job is fun. c.The job is simple. d.The job is very dangerous.

d.The job is very dangerous.

On average, skyscraper window washers earn more than window washers for lower buildings. The difference in pay can be attributed to a.diminishing marginal returns. b.the marginal product of capital. c.the marginal product of labor. d.a compensating differential.

d.a compensating differential.

Differences in average wages between men and women a.estimates the precise level of discrimination in the labor market. b.accurately estimate the degree of gender discrimination in the labor market. c.is an unbiased measure of gender discrimination in the labor market. d.do not on their own indicate the size of gender discrimination in the labor market.

d.do not on their own indicate the size of gender discrimination in the labor market.

Measurable variables like age, years of education, and experience a.do not explain any of the variation in wages in our economy. b.explain exactly half of the variation in wages in our economy. c.explain more than half of the variation in wages in our economy. d.explain less than half of the variation in wages in our economy.

d.explain less than half of the variation in wages in our economy.

People allocate time for college because a.it increases the wages paid to low-skilled workers. b.it decreases human capital by lowering work experience. c.it leads to lower lifetime earnings because opportunity costs are high. d.it leads to higher lifetime earnings because it is an investment in human capital.

d.it leads to higher lifetime earnings because it is an investment in human capital.

A star professional baseball player earns a high income because a.of a lack of technological advances in the game of baseball. b.baseball players tend to have above average intelligence. c.of a compensating differential that exists for playing baseball. d.many people can enjoy watching the player play at a relatively low cost.

d.many people can enjoy watching the player play at a relatively low cost.

All of the following concepts rely on the assumption of equilibrium in the labor market except a.differences in educational attainment. b.compensating differentials c.the superstar phenomenon d.the theory of efficiency wages

d.the theory of efficiency wages

Assume men and women in a similar occupation have the same level of education and levels of human capital. Women tend to delay entering the workforce until after the kids enter elementary school. If no discrimination exists, we would expect to see a.differences in wages between men and women would be the result of differences in beauty. b.women would earn more than men. c.men and women would earn the same. d.women would earn less than men.

d.women would earn less than men.