Module 5 ECON 202
Which factor(s) partially explain(s) wage differentials? 1. difference in talent 2. different amount of human capital 3. compensating differentials
1 , 2, and 3
An example of statistical discrimination
a company, considering two equally qualified job candidates, chooses one based on ethnic stereotype
An example of causation
a frim producing CFLs installs new machinery the per-day production of CFLs increases
Implicit bias
attitudes or stereotypes that affect our understanding, actions and decisions in an unconscious manner
A firm's demand curve for labor will shift because of a
change in the demand for a firm's product
A difference in wages required to offset the desirable or undesirable aspects of a job is a(n)
compensating differential
Rosalie and Henry work at a nursery where they grow sunflowers. Rosalie works all day in the hot sun, planting and harvesting sunflowers, where she earns $34 per hour. Henry, on the other hand, works inside the air conditioned warehouse, drying and roasting sunflower seeds and earns $22 per hour. Which source of wage differences is exemplified by the example?
compensating differentials
Wage differences that reflect the fact that some jobs are less pleasant than others are called
compensating differentials
Jenna is a concert pianist. A grand piano is a _____ to her labor in the production of her concerts.
complement
A decrease in the demand for pastry chefs may follow an increase in
concerns about healthy living
A decrease in the productivity of labor will, all else equal, lead to a(n) ___ in the equilibrium quantity of labor and ____ in the equilibrium price of labor
decrease decrease
Damon's wage falls. Via the substitution effect, he would ___ his work hours; via the income effect, he would ____ his work hours
decrease increase
Alex and Marilyn started Ono Yo, an organic and fresh fruit frozen yogurt truck. As the demand for organic and healthier desserts rose, demand for Ono Yo's products grew. Because of the growth in demand for Ono Yo's product, Alex's and Marilyn's
demand for workers increase
Prejudice
discrimination that exists as a result of an individual having a dislike towards members of a particular group
Taste-based discrimination
discrimination that occurs because the discriminator dislikes another person's gender, race, or some other personal characteristic
The labor demand curve has a ____ slope because of ____
downward diminishing marginal product
An example of a shift with both the labor supply curve and the labor demand curve
employers covering more of the cost of health insurance for all employees
Statistical discrimination
employers using a characteristic of a group to make inferences about an individual's skills
Companies that engage in workplace discrimination are likely to
have lower profits when they compete against other firms that do not discriminate
Compensating differentials lead to
higher salaries for more unpleasant jobs.
The cost of working one more hour is the
hour of leisure that is given up
In labor market, the quantity is the
hours of work bought or sold
The substitution effect of a higher wage measures
how people respond to a change in relative prices.
The income effect measures
how people's choices change when they have more income.
When economists use the term "correlation", they are referring to
how two variables move together in a predictable way
An increase in population that increases the size of the labor force will, all else equal, lead to a(n) ___ in the equilibrium quantity of labor and a(n) ____ in the equilibrium price of labor
increase decrease
Sources of discrimination do not include
job applicants
Derived demand means
labor demand is derived from demand for the product it produces
Undesirable job features lead to a ________ labor ________.
lower supply
Labor demand is based on ____ and labor supply is based on _____
marginal revenue product opportunity cost
The labor supply curve for social workers will shift to the right when
non-wage benefits for social workers increase
Suppose a study finds that hot cocoa sales in a region tend to increase the same time that the number of car crashes increase in the same region. The study's authors conclude that hot cocoa sales cause car crashes. The author are most likely exhibiting
omitted variable bias
The marginal product of labor is how much an additional unit of labor affects
output
A shift in the demand for labor will not occur if the
price of labor falls
Jordan's Photography Studio pays its workers $60 per day and sells poster-size prints for $10 each. If the market wage rises to $70, then the
quantity of labor demanded decreases, but the labor demand curve does not shift
Your landscaping company labor and shovels. The price of shovels falls, and this _____ your demand for labor because labor and shovels are ____
raises complements
When earnings reflect compensating differentials, workers with _____ human capital earn _____ salaries because _____.
similar different their jobs differ in things like risk or enjoyment
Human capital is
the accumulated knowledge and skills that make a worker more productive
What happens in the labor market for custodians in Indonesia when the population of Indonesia grows?
the custodian labor supply curve shifts rightward
An example of derived demand
the demand for kitchen renovation affects the demand for carpenters
When would you see the greatest gain if a compensating differential is built into your salary?
the differential is for a large positive job aspect that you care about more than most people do
The Rational Rule for Employers says to hire more workers if
the marginal revenue product is greater than (or equal to) the wage
Higher wages for data analysts would not cause
the market supply curve for data analysts to shift
Counterfactual
the outcome that would have happened in some other scenario
The value of the marginal product of labor is the marginal product of labor multiplied by
the price of the item the firm produces
The U.S. Bureau of the Census reported that, on average, white men earn $50,945, whereas white women earn $31,008. Economic discrimination explains at least some of this wage gap, but economists think that there are other factors that also contribute to wage gaps? Not an explanation offered by economists these types of wage gaps?
there are innate differences between men and women that make men more productive than women because men are more productive, they can earn more on average
In a perfectly competitive market, employers will not pay less than the market wage because, at a wage below the equilibrium wage
they would not be able to hire anyone
Suppose the labor market for electricians is in equilibrium. Which event might decrease the wage of electricians?
unemployed manufacturing workers attend technical school to learn the electricians trade
When an employer makes decisions based on statistical discrimination
using observations about the average characteristics of a group to make inferences about an individual
A profit-maximizing firm, operating in a perfectly competitive market, will add new units of labor until the
value of the marginal product equals the wage
Because of extreme national pride, the government of Samara passes a law requiring all workers to have the ability to speak French, the national language
wage differential continues to exist
Due to their dislike for short servers, all the residents of the city of Da San willingly pay more to eat out elsewhere rather than eating at a restaurant with short servers
wage differential continues to exist
A competitive market is guided by the economic self-interest of employers seeking the lowest labor costs and consumers seeking the least expensive products and services
wage differential is eliminated
Jason owns a deli and wants to maximize his profits. Therefore, he is willing to hire anyone at the minimum wage
wage differential is eliminated