Deck 15: Income,inequality,and Poverty

Question 1

What theory would lead you to be suspicious of a job advertisement that reads: "Help Wanted! Fun and exciting job with excellent pay"?

A)human capital
B)life-cycle wage pattern
C)winner-take-all
D)compensating differentials
E)efficiency wage theory

Answer 1

D

Question 2

Leroy has a cause: He loves cats.As an economist,he could earn $100,000 as a faculty member,but instead he decides to devote his time to the Humane Society as its chief economist.Knowing nothing else,what do you expect his salary with the Humane Society to be,and why?

A)He would receive higher pay at the Humane Society because of the difference in skill levels.
B)He would receive lower pay at the Humane Society because of signal theory.
C)He would receive lower pay at the Humane Society because of the compensating differential theory.
D)He would receive higher pay at the Humane Society because of signal theory.
E)He would receive the same pay as either a professor or as a chief economist at the Humane Society.

Answer 2

C

Question 3

What theory might partially explain why an ugly person might earn less than a beautiful person?

A)winner-take-all
B)compensating differential
C)samaritan's dilemma
D)occupational crowding
E)efficiency wage

Answer 3

B

Question 4

As the mayor of a local town,I have the power to repeal workplace safety laws.How would repealing all workplace safety laws affect the wages of construction workers building the local school?

A)It would reduce wages because of less severe negative compensating differentials.
B)It would increase wages because of less severe negative compensating differentials.
C)It would reduce wages because of more severe negative compensating differentials.
D)It would increase wages because of more severe negative compensating differentials.
E)It would have no affect on wages.

Question 5

As the mayor of a local town,I have the power to repeal workplace safety laws.How would repealing all workplace safety laws affect the wages of kindergarten teachers,who work in relatively safe jobs,at the local school?

A)It would reduce teachers' wages because of less-severe negative compensating differentials.
B)It would increase teachers' wages because of less-severe negative compensating differentials.
C)It would reduce teachers' wages because of more-severe negative compensating differentials.
D)It would increase teachers' wages because of more-severe negative compensating differentials.
E)It would have little effect on teachers' wages because of a lack of negative compensating differentials.

Question 6

The popular TV shows Ice Road Truckers and Ax Men portray workers engaged in dangerous jobs such as driving big trucks over ice and cutting down big trees.What would you expect the salary of these workers to be,and why?

A)They would earn a low salary because of tax credits for the poor.
B)They would earn a high salary because they are in desirable geographic locations.
C)They would earn a high salary because they have dangerous jobs.
D)They would earn a low salary because they have union jobs.
E)They would earn a low salary because they have dangerous jobs.

Question 7

What theory would justify a job advertisement that reads: "Help Wanted! Dangerous job but excellent pay and benefits"?

A)human capital
B)life-cycle wage pattern
C)compensating differentials
D)winner-take-all
E)efficiency wage

Question 8

Why might I expect a job as a college professor to pay a wage lower than the wage one could receive in the private sector?

A)because of negative compensating differentials
B)because of positive compensating differentials
C)because of efficiency wages
D)because of the life-cycle wage pattern
E)because of in-kind transfers

Question 9

Nicole,a woman,is more educated and better trained than Tom,a male.Despite these differences in education and training,Tom still earns more because he is a coal miner,whereas Nicole is a secretary.Which model best explains the fact that Tom earns more than Nicole?

A)the efficiency wage model
B)the winner-take-all model
C)the income mobility model
D)the human capital model
E)the model of compensating differentials

Question 10

An employee gains work experience by staying in a job for a long period of time.What would an economist expect to happen to this employee's wages?

A)Wages would increase as experience is gained.
B)Wages would decrease as experience in gained.
C)Wages would increase but then decrease over time as experience is gained.
D)Wages would decrease but then increase over time as experience is gained.
E)Experience would have no effect on wages.

Question 11

Using a compensating differential wage theory,why do some individuals earn more than others?

A)Workers who earn more are more productive.
B)Workers need to earn more to be willing to accept dangerous working conditions.
C)Workers need to earn more to be willing to accept a safe indoor job.
D)Workers who are more educated and better trained are able to earn more than the equilibrium wage.
E)Workers who earn more tend to be concentrated in a single occupation.

Question 12

I'm a physician in New York City,my favorite city in the world.What would be some of the non-monetary determinants of my wages?

A)My wages are higher because of my education and the desirability of my location.
B)My wages are lower because of my education and the desirability of my location.
C)My wages are higher because of my education,but they are reduced because of the desirability of my location.
D)My wages are higher because of the desirability of my location,but they are slightly reduced because of my education.
E)My wages are lower because my employer pays me an efficiency wage.

Question 13

Some employers are willing to provide job training for workers.The employer might be willing to pay for the training when:

A)the training is specific to the employer.
B)the training is a general skill that could be used at any job for any employer.
C)the training is of short length.
D)the training is extensive.
E)on its completion,the student receives a degree.

Question 14

If Nicole is more educated and better trained than Tom,economists would use the ___________________ model to predict that Nicole should earn the higher wage.

A)occupational crowding
B)winner-take-all
C)income mobility
D)human capital
E)compensating differential

Question 15

As a college student,you realize that you have become an expert at playing video games.If you saw a commercial on TV seeking applications for video-game testers (your dream job),what would you expect the job to pay?

A)low wages because of the efficiency wage principle
B)low wages because of occupational crowding
C)high wages because of compensating differentials
D)low wages because of compensating differentials
E)high wages because of the in-kind transfers

Question 16

When comparing individuals' wages,what effect do differences in their levels of education and training have?

A)Education and training can completely explain the existence of income inequality.
B)Education and training can completely explain why some individuals are more productive than others.
C)Education and training has no bearing on why some individuals are drawn to certain occupations.
D)Education and training can partially explain why some individuals earn higher wages than others.
E)Education and training has no bearing on income mobility.

Question 17

What theory would suggest that learning material on your own generates the same benefits as those achieved by formally attending classes and receiving a degree?

A)human capital
B)signal
C)compensating differentials
D)winner-take-all
E)efficiency wage

Question 18

Late-night employees working in a 24-hour store often earn more than similar employees who work the day shift.What explains this difference in pay?

A)life-cycle wage pattern
B)human capital theory
C)occupational crowding
D)negative compensating differential
E)positive compensating differential

Question 19

Coal mining is a dangerous occupation.Which example correctly depicts the effects of new safety regulations on the negative compensating differential for the job of a coal miner?

A)The passage of workplace safety laws at first increases but then decreases the severity of the negative compensating differential for such a job.
B)The passage of workplace safety laws increases the severity of the negative compensating differentials for such a job.
C)The passage of workplace safety laws decreases the severity of the negative compensating differentials for such a job.
D)The passage of workplace safety laws at first decreases but then increases the severity of the negative compensating differentials for such a job.
E)The passage of workplace safety laws has no effect on the compensating differentials for such a job.

Question 20

Some employers are willing to provide job training for workers.However,an employer might require the worker to pay for the training when the training is:

A)specific to the employer.
B)a general skill that could be used in any job for any employer.
C)of short length.
D)extensive.
E)provided by a manager in the firm.

Question 21

As an Internet retailer,I need to find a location for my headquarters.If I am primarily concerned with the cost of labor and want to pay those I hire as little as possible,I should establish my business in a(n):

A)location with a lot of good restaurants.
B)cold location in a rural area.
C)urban location that has a lot of crime.
D)rural location that has frequent wildfires and floods.
E)urban location with a lot of earthquakes.

Question 22

Using an efficiency wage theory,why do some individuals earn more than the market equilibrium wage?

A)Workers who earn more are those who are more productive.
B)Workers need to earn more to be willing to accept dangerous working conditions.
C)Workers need to earn more to be willing to accept a safe indoor job.
D)Workers who are more educated and better trained are able to earn more than the equilibrium wage.
E)Workers who earn more tend to be concentrated in a single occupation.

Question 23

In which of two unionized firms would you expect workers to receive higher wages?

A)in a firm where the threat of a strike is low
B)in a firm where the threat of a strike is high
C)in a firm that can substitute labor with capital easily
D)in a firm that can relocate the production process easily
E)in a firm that has workers with low education levels

Question 24

If you were the chief economics planner in Mitchell,South Dakota,a rural location that boasts the world's largest corn palace,what would be your biggest challenge in encouraging economic development in terms of location?

A)If the location is deemed undesirable by employees,employers will have to pay lower wages.
B)If the location is deemed undesirable by employees,employers will have to pay higher wages.
C)If the location has a low cost of living,employers will have to pay higher wages.
D)If the location has a high cost of living,employers will have to pay lower wages.
E)Its location should have no effect on wages.

Question 25

As an employer,I want productive employees who will stay with the firm for an extended period of time,so I should pay:

A)less because human capital theory suggests better-paid employees work harder and stay longer.
B)less because of the existence of compensating differentials.
C)more because human capital theory suggests better-paid employees work harder and stay longer.
D)more because of the existence of compensating differentials.
E)more because efficiency wage theory suggests that the employer will be able to secure more productive employees.

Question 26

What is a significant difference between a union job and a non-union job in terms of pay?

A)Union jobs pay less than non-union jobs because of efficiency wage theory.
B)Non-union jobs pay more than union jobs because of the winner-take-all theory.
C)Union jobs pay more than non-union jobs because of occupational crowding.
D)Union jobs pay more than non-union jobs because of the threat of a strike.
E)Non-union jobs pay more than union jobs because of binding arbitration.

Question 27

When comparing a union job to a non-union job,we would expect to see:

A)higher wages being paid to the employee holding a non-union job.
B)lower wages being paid to the employee holding a union job.
C)better pay and benefits being received by the employee holding a non-union job.
D)no difference in the pay and benefits received by the employees in the union and non-union jobs.
E)higher wages being paid for the employee holding a union job.

Question 28

What theory suggests that learning material on your own would not generate the same benefits as those achieved by formally attending classes and receiving a degree?

A)human capital
B)signal
C)compensating differentials
D)winner-take-all
E)efficiency wage

Question 29

One frequently sees a strong relationship between median annual earnings and education level.What theory would suggest that education provides valuable skills?

A)compensating differentials
B)income mobility
C)life-cycle wage pattern
D)signal
E)human capital

Question 30

A white male from the Midwest earns $50,000 a year and a white female earns $40,000 a year.What can we conclude about this situation?

A)There is no discrimination present.
B)The white female is being discriminated against by $10,000.
C)The white female is being discriminated against,but the amount is less than $10,000.
D)The white female is being discriminated against,but the dollar amount is unclear.
E)There is not enough information to know whether discrimination exists.

Question 31

As an employee at a convenience store,I am content to stay with my employer because my wage is 50% higher than the market rate.What economic theory could justify my employer's willingness to pay above the market rate?

A)samaritan's dilemma
B)winner-take-all
C)human capital
D)compensating differential
E)efficiency wage

Question 32

Why might I expect a fast-food job to pay a wage higher than the minimum wage?

A)because it is boring and an efficiency wage is offered to reduce turnover
B)because it is safe
C)because it doesn't require a lot of education
D)because it is not unionized
E)because it is exciting and fast-paced

Question 33

My mother told me that I needed to go to college because it would be the only way I could get a high-paying job.What economic theory would justify her advice?

A)efficiency wage
B)compensating differential
C)life-cycle wage pattern
D)human capital
E)occupational crowding

Question 34

Besides sex discrimination,why might women earn less than men in the workplace?

A)Women have more human capital.
B)Women have fewer years of work experience.
C)Women have more years of work experience.
D)Women work more hours per year.
E)Women more frequently belong to a union.

Question 35

When workers of the same ability are not paid the same amount because of a group characteristic such as ethnic origin or age,we call this:

A)efficiency wage theory.
B)wage discrimination.
C)compensating differential theory.
D)winner-take-all theory.
E)occupational crowding.

Question 36

What theory would suggest that an employee should receive a wage higher than the equilibrium wage rate?

A)efficiency wage theory
B)in-kind transfers
C)occupational crowding theory
D)samaritan's dilemma theory
E)binding arbitration theory

Question 37

In recent decades,more women than men have received undergraduate degrees.Consequently,women's wages will:

A)fall,according to compensating differential theory.
B)increase,according to compensating differential theory.
C)decrease,according to human capital theory.
D)increase,according to human capital theory.
E)decrease,according to efficiency wage theory.

Question 38

As the owner of a television studio,I am concerned about the high wages I must pay my employees relative to wages paid by other television studio owners.A consultant has suggested that my location is a contributing factor to these higher wages because I have built my studio in a(n):

A)sunny location in an urban area with a lot of good restaurants.
B)rural location populated by friendly people.
C)urban location that has very little crime and good schools.
D)location that has frequent wildfires and floods.
E)urban location populated by friendly people.

Question 39

What theory would justify a job advertisement that reads: "Help Wanted! Looking for a person willing to stay with the firm for a long time.Excellent pay"?

A)human capital
B)life-cycle wage pattern
C)compensating differentials
D)winner-take-all
E)efficiency wage

Question 40

The cost of education at an Ivy League university is over $50,000 per year.At a community college,the cost of education is only a few thousand dollars per year.What economic theory could justify enrolling in an Ivy League school?

A)compensating differentials
B)income mobility
C)life-cycle wage pattern
D)signal
E)human capital

Question 41

What differentiates the U.S.income inequality ratio from that found in less-developed countries?

A)It is higher than in less-developed countries due to the large number of poor people.
B)In less-developed countries,the inequality ratio is lower than in the United States due to the large number of rich people.
C)In the United States,it is lower than that found in less-developed countries because the poor in the United States earn more than the poor in less-developed countries.
D)There is no significant difference between the inequality ratios in the United States and in less-developed countries.
E)In the United States,it is lower than in less-developed countries due to corruption.

Question 42

What theory can explain why a CEO might earn so much more than other managers with similar experience and education at the same company?

A)efficiency wage theory
B)winner-take-all theory
C)human capital theory
D)samaritan's dilemma
E)binding arbitration

Question 43

What is the approximate inequality ratio (richest 20% ÷ poorest 20%)in the United States?

A)4.1
B)15.8
C)24.3
D)75.1
E)98.2

Question 44

Besides overt sex discrimination,why also might women earn less than men in the workplace?

A)Women have more human capital.
B)Women tend to congregate in a narrow range of jobs that pay very little.
C)Women have more years of work experience.
D)Women work more hours per year.
E)Women tend to receive an efficiency wage.

Question 45

The occupational crowding model of discrimination predicts which of the following?

A)why men,in some cases,earn less than women
B)that firms will compete with one another for the best employee and that discrimination will be eliminated
C)that,unless the government gets involved,discrimination will become more severe
D)that men's wages will fall and women's wages will rise when certain jobs are no longer dominated by men
E)the financial advantages for women crowding into a single occupation

Question 46

Approximately what percentage of the total national income is owned by the poorest 40% (bottom two quintiles)of households in the United States?

A)3%
B)7%
C)12%
D)20%
E)40%

Question 47

I expect that my wages will increase over time.What theory justifies this expectation?

A)compensating differential
B)life-cycle wage pattern
C)efficiency wage
D)occupational crowding
E)samaritan's dilemma

Question 48

What theory can partially explain why pink-collar jobs,such as nurse and dental hygienist,earn so little despite the important services they provide?

A)winner-take-all
B)compensating differential
C)samaritan's dilemma
D)occupational crowding
E)efficiency wage theory

Question 49

What theory would suggest that a Nobel Prize-winning economist should earn significantly more than other economists?

A)samaritan's dilemma
B)life-cycle wage pattern
C)efficiency wage
D)compensating differential
E)winner-take-all

Question 50

As a male nurse,I often complain about the low pay I receive despite the fact that I have a significant amount of education.What economic theory explains my suppressed wage?

A)compensating differential
B)human capital
C)winner-take-all
D)occupational crowding
E)efficiency wage

Question 51

If households in the lowest income-earning bracket are doing relatively well compared to those in the highest income-earning bracket,the inequality ratio will:

A)fall.
B)initially grow but then fall.
C)grow.
D)initially fall but then grow.
E)be unaffected.

Question 52

What role does a strong government play in economic development?

A)It encourages investment by removing corruption.
B)It encourages the payment of efficiency wages.
C)It encourages occupational crowding.
D)It encourages winner-take-all situations.
E)It discourages investments in human capital.

Question 53

What role does corruption play in creating income inequality?

A)It discourages mobility.
B)It encourages human capital investments.
C)It discourages winner-take-all situations.
D)It discourages business investment.
E)It discourages discrimination.

Question 54

The pay for journalists is quite varied.A top-tier journalist often receives a steady flow of assignments,such as two weekly columns,and so earns generous pay.A lower-tier journalist,however,often experiences sporadic work assignments with little to no pay.What economic theory explains this situation?

A)winner-take-all
B)in-kind transfers
C)efficiency wage
D)occupational crowding
E)compensating differentials

Question 55

Why do the wages of those near retirement decrease slightly?

A)These workers are gaining additional skills.
B)These workers are becoming more productive.
C)These workers are becoming more efficient.
D)These workers are being discriminated against.
E)These workers are gaining additional experience but are not keeping up with new technologies.

Question 56

You have an idea to provide a grocery home-delivery service in the developing country of Mongolia.What role would corruption play in the success of your business?

A)It would make the market more competitive.
B)It would encourage you to work harder.
C)It would encourage you to invest in your business.
D)It would discourage you about investing in your business.
E)It would have no effect on the success of your business.

Question 57

If your daughter were to inform you that she wanted to be a bank teller and you were concerned about her ability to pay her bills,what economic theory could you use to convince her to become an engineer instead?

A)compensating differential
B)life-cycle wage pattern
C)winner-take-all
D)occupational crowding
E)efficiency wage

Question 58

Which statement best represents the phenomenon of occupational crowding?

A)Women tend to be overrepresented in certain jobs.
B)Women and men are equally represented in all occupations.
C)A woman might earn less than a man because she has less education
D)Women find themselves earning more than equally capable men.
E)Women have their work career interrupted during their child-bearing years.

Question 59

What is the name of the model that best explains why an actor in a nationally broadcast television program earns so much more than an actor who is equally talented and productive but who performs in a local play?

A)occupational crowding
B)winner-take-all
C)income mobility
D)human capital
E)life-cycle wage pattern

Question 60

Why is it unlikely that income inequality could ever be eliminated?

A)Workers will always have the same skills,abilities,and productivities.
B)All jobs are roughly equal in their attractiveness to workers.
C)All workers are perfectly mobile.
D)Workers will always have different skills,abilities,and productivities.
E)Workers all share the goal of earning as much income as possible.

Question 61

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

Calculate the inequality ratio from the following information:

A)5
B)86
C)9
D)21
E)43

Question 62

Why is it that economists believe the level of inequality in less-developed countries is overstated?

A)It doesn't take corruption into account.
B)It doesn't take income from low-paying jobs into account.
C)It doesn't take investments in human capital into account.
D)It doesn't take goods and services produced within the home into account.
E)It doesn't take discrimination into account.

Question 63

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

Approximately what percentage of income is earned by the richest 20% of households in the United States?

A)90%
B)10%
C)50%
D)80%
E)20%

Question 64

Use the accompanying table,which represents the distribution of income in the countries of Mateer and Coppock,to answer the questions that follow.

What is the degree of income inequality in Coppock?

A)0.3
B)3
C)30
D)300
E)25,000

Question 65

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

How does the level of income inequality in the United States compare to that in other countries?

A)There is less in the United States when compared to other more-developed countries,and less in the United States when compared to less-developed countries.
B)There is greater income inequality in the United States when compared to other developed countries,and less in the United States when compared to less-developed countries.
C)There is less income inequality in the United States when compared to other more-developed countries,and greater income inequality in the United States when compared to less-developed countries.
D)There is greater income inequality in the United States when compared to other more-developed countries,and greater income inequality in the United States when compared to less-developed countries.
E)There are no differences in income inequality between the United States and most other countries in the world.

Question 66

What is the approximate poverty rate for minority women who are heads of household in the United States?

A)10%
B)20%
C)38%
D)50%
E)75%

Question 67

Income mobility represents the:

A)inability of a worker to move to a job.
B)inability of a worker to be trained and earn less.
C)inability of a worker to be trained and earn more.
D)ability of a worker to move to a job where she or he can earn the most.
E)ability of a worker to move up or down the economic ladder.

Question 68

Which of the following represents an in-kind transfer?

A)a scholarship
B)an income tax refund
C)a Social Security check
D)an unemployment insurance check
E)food supplements received through the Subsidized Nutrition Assistance Program

Question 69

The movement of individuals and households from one income range to another is called:

A)income mobility.
B)wealth mobility.
C)in-kind transfers.
D)the samaritan's dilemma.
E)a compensating differential.

Question 70

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

The poverty rate is calculated as the percentage of the population:

A)who are not working.
B)who are unable to pay their food and housing expenses.
C)who are not earning sufficient income from labor.
D)whose incomes are above a poverty threshold.
E)whose incomes are below a poverty threshold.

Question 71

As a recent college graduate,I have a temporary inability to pay my rent and am forced to move back to my old bedroom in my parent's house.My parents,having taken an economics class decades ago,may be unconcerned with my current low-income situation because they think I:

A)lack income mobility.
B)am among the long-term poor.
C)am among the marginal poor.
D)am a victim of the samaritan's dilemma.
E)am a victim of corruption.

Question 72

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

Calculate the inequality ratio from the following information:

A)3
B)8
C)10
D)80
E)8,000

Question 73

In a discussion with my mother,who is an economist,I say,"I am living in poverty,I cannot be expected to buy you a birthday gift." She replies that technically I am not living in poverty because my income is above the:

A)poverty rate.
B)poverty threshold.
C)negative income tax rate.
D)inequality ratio.
E)in-kind transfer rate.

Question 74

Use the accompanying table,which represents the distribution of income in the countries of Mateer and Coppock,to answer the questions that follow.

What is the degree of income inequality in Mateer?

A)0.1
B)1
C)10
D)100
E)1,000

Question 75

One of the causes of poverty in the United States is:

A)high worker productivity.
B)low levels of education.
C)antidiscrimination laws.
D)government involvement in the marketplace.
E)the existence of economic prosperity in the macroeconomy.

Question 76

What is the approximate poverty rate for children in the United States?

A)0.5%
B)6%
C)10%
D)22%
E)31%

Question 77

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

Approximately what percentage of income is earned by the poorest 20% of households in the United States?

A)3.2%
B)15.6%
C)20.1%
D)25.3%
E)10.4%

Question 78

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

What is the degree of income inequality in Sweet?

A).05
B)0.5
C)5
D)50
E)500

Question 79

In the United States there is a strong belief that anyone willing to work hard is able to become rich.This belief reflects which of the following theories?

A)efficiency wage
B)income mobility
C)samaritan's dilemma
D)compensating differential
E)occupational crowding

Question 80

Use the accompanying table,which represents the distribution of income in the countries of Sweet and Sour,to answer the questions that follow.

What is the degree of income inequality in Sour?

A).0075
B)0.75
C)7.5
D)750
E)7,500