Deck 19: Earnings and Discrimination

Question 1

Some economists suggest that international trade has led to an expanding wage gap between high-skill and low-skill workers in the United States.

Answer 1

True

Question 2

Since 1995,global manufacturing employment has declined,yet global industrial output has risen.

Answer 2

True

Question 3

A compensating differential is a difference in wages due to higher levels of education or other forms of human capital.

Answer 3

False

Question 4

The signaling theory of education maintains that workers who complete specific levels of education enhance their productivity through education.

Question 5

The statement that "the rich get richer,and the poor get poorer" is supported by evidence of an expanding wage gap between high-skill and low-skill workers.

Question 6

Higher levels of human capital are correlated with higher earnings because firms are willing to pay more for better-educated workers who have higher marginal productivities.

Question 7

As a result of an increase in the earnings gap between skilled and unskilled jobs,the incentive to get a college education has been declining.

Question 8

A compensating differential refers to a difference in wages that arises from nonmonetary characteristics.

Question 9

It is increasingly clear that technological change,rather than international trade,has been largely responsible for an expanding wage gap between high-skill and low-skill workers.

Question 10

One hypothesis to explain the rising gap in wages between unskilled and skilled workers in the United States is that international trade has altered the relative demands for skilled and unskilled workers.

Question 11

One reason why better-looking workers may have higher earnings is that physical attractiveness may enhance a worker's productivity for certain jobs,especially for those workers who deal with the public.

Question 12

The demand for workers with excellent problem-solving skills is increasing,as are the wages for those workers.

Question 13

The rising gap in wages between unskilled and skilled workers is most likely related to a larger increase in demand for unskilled occupations relative to skilled occupations.

Question 14

One explanation for the loss in manufacturing jobs is that new technologies have replaced the need for some workers.

Question 15

One reason why better-looking workers may have higher earnings is that physical attractiveness is correlated with intelligence.

Question 16

The United States is losing manufacturing jobs to countries like China and India,where manufacturing jobs have increased 30 percent since 1995.

Question 17

The signaling theory of education maintains that workers who complete specific levels of education signal their high productivity to potential to employers.

Question 18

The fact that doctors are paid more than economics professors is an example of a compensating differential.

Question 19

If the signaling theory of education is correct,then education is correlated with higher earnings because people with higher levels of education are more productive.

Question 20

A computer is an example of productivity-enhancing human capital.

Question 21

Politicians often point to wage differentials as evidence of labor-market discrimination against ethnic minorities and women;however,economists argue against this approach because people differ in the kinds of work they are willing and able to do.

Question 22

Discrimination is a reflection of some people's prejudice against certain groups in society.

Question 23

Economists would argue that the gender wage gap is narrowing because of efficiency wages.

Question 24

Labor unions will raise the quantity of labor demanded.

Question 25

When differences in human capital among workers lead to discrimination,the differences are typically a result of social or political processes rather than economic processes.

Question 26

Empirical evidence suggests that ability,effort,and chance are not likely to be significant contributors to wage differences.

Question 27

Education and on-the-job training are sources of human capital.

Question 28

Efficiency wages decrease employee turnover.

Question 29

Differences in human capital among groups of workers is possibly a reflection of past discrimination.

Question 30

Efficiency wages decrease employee effort.

Question 31

Efficiency wages will raise the quantity of labor supplied to the market.

Question 32

Economic theory of labor markets suggests that wages are governed by labor supply and labor demand.

Question 33

The superstar phenomenon explains why professional athletes earn more than amateur athletes.

Question 34

The human-capital theory of education maintains that workers who complete specific levels of education enhance their productivity through education.

Question 35

When comparing average wages for black and white workers in the United States,wages paid to black workers have been about 20 percent less than those paid to white workers.

Question 36

Discrimination is an emotionally charged issue that is impossible to study objectively.

Question 37

Politicians often point to average wage differentials as evidence of labor-market discrimination against ethnic minorities and women;however,economists argue against this approach because they don't trust any of the statistics quoted by the politicians.

Question 38

When comparing average wages for male and female workers in the United States,wages paid to females have been about 40 percent less than those paid to male workers.

Question 39

An effective minimum wage law will increase the quantity of labor demanded.

Question 40

Superstars earn high incomes due to their ability to satisfy the demands of millions of people at once.

Question 41

Explain the role of job experience in explaining the differences between the average wages of men and women.

Question 42

Discrimination is usually not a profit-maximizing strategy.

Question 43

Experimental evidence indicates women choose less competitive environments than men.

Question 44

One example of labor-market discrimination is that firms may be less likely to interview job-market candidates whose names suggest that they are members of a racial minority.

Question 45

Explain how compensating differentials could contribute to differences between the average wages of men and women.

Question 46

Evaluate the following statement: "The gender pay gap provides evidence of widespread,severe,ongoing discrimination by employers and fellow workers."

Question 47

A recent study of the determinants of wages for clerical staff at a state university found that years of schooling,years of experience,age and job characteristics only explained about one-half of the difference in wages.Describe other factors that may be important in explaining wages differences for clerical staff.

Question 48

Evidence of discrimination is most apparent when one compares wages among broad groups.

Question 49

Profit-maximizing,competitive firms will not discriminate in the hiring of workers unless consumers exercise a preference for discrimination in product markets or governments mandate discrimination.

Question 50

The National Collegiate Athletic Association (NCAA)has long argued that nationally-prominent college athletes are compensated with an investment in human capital that far exceeds the monetary reward of playing professional sports.Examine this argument in light of your knowledge of human capital theory and the economic theory of labor markets.

Question 51

In a recent U.S.presidential campaign,a lobbyist for a prominent national women's organization made the claim that women in the United States earn $0.60 for every $1.00 earned by a man.A reporter,who was prepared for this statement,asked the lobbyist why wages paid to the organization's secretarial staff (all of whom were women)were significantly below the national average if they were truly interested in raising the rates of compensation for women.If you were the lobbyist,how would you have answered this question? Do you think your answer is convincing? Explain.

Question 52

In a labor market free from discrimination,wages for workers that are employed by the same company will still differ.

Question 53

Explain the theory that education acts as a signaling device.How does this contrast with the theory of education as an investment in human capital?

Question 54

When discrimination occurs as a result of prejudice,firms do not maximize profits.

Question 55

All differences in wages that are not accounted for by differences in human-capital investment are likely to be a result of discrimination.

Question 56

If people with blue eyes earn more than people with brown eyes,we have proof of discrimination against people with brown eyes.

Question 57

After graduating from college,you receive job offers from five different accounting firms.All job offers have a different compensation package.Is it irrational for you to accept an offer that doesn't provide the highest level of monetary compensation? Use the concept of compensating differentials to explain your answer.

Question 58

Consumers are often a primary source of discrimination in labor markets.

Question 59

Streetcar owners in the early 20th century were against segregation for profit maximizing reasons.

Question 60

List the productivity factors that may explain the differences in pay between men and women in similar occupations.Do any of these factors arise as a result of cultural or social traditions? If so,describe how changes in social relationships will affect the pay gap over time.

Question 61

Figure 19-1

-Refer to Figure 19-1.Some policymakers have argued that the government should establish a "living wage." A living wage would provide workers a reasonable standard of living in their city or region.If a living wage of $10 per hour is established in the market pictured here,we would expect

A) employment will increase to 14 million.
B) employment will decrease to 8 million.
C) the wage will actually rise to $20 per hour.
D) there will be a surplus of 14 million workers.

Question 62

If we were to observe above-equilibrium wages in a particular labor market,then a possible explanation might be that

A) the theory of efficiency wages holds true for that market.
B) there is a powerful labor union representing workers in that market.
C) workers are largely unskilled and/or inexperienced and minimum-wage laws are effectively holding wages up in that market.
D) All of the above are correct.

Question 63

Figure 19-3
The manufacturing labor market.

-Refer to Figure 19-3.Suppose the manufacturing labor market,which is non-unionized,is in equilibrium at a wage equal to $30.Suppose now that the AFL-CIO (a labor organization)organizes the workers in the manufacturing market and negotiates a wage of $38 per hour.After the workers become unionized,how many workers do manufacturing firms collectively hire?

A) 130 workers
B) 150 workers
C) 170 workers
D) There is not enough information to determine the number of workers.

Question 64

Which of the following is not an example of efficiency wages?

A) More productive workers are paid more to reflect their higher output.
B) Higher wages induce higher output from workers.
C) Better quality applicants apply for jobs that pay above-equilibrium wages.
D) Workers are less likely to leave jobs that pay above-equilibrium wages.

Question 65

Which of the following statements is not correct?

A) Some firms pay wages that are above the equilibrium wage.
B) Workers sometimes form labor unions to push their wages up.
C) Wages never deviate from the balance of supply and demand in the market for labor.
D) The federal government mandates that employers pay their workers at least as much as the minimum wage.

Question 66

Figure 19-1

-Refer to Figure 19-1.What is the loss associated with wages moving from $8 to $10?

A) 2 million jobs.
B) 6 million jobs.
C) 8 million jobs.
D) 14 million jobs.

Question 67

Which of the following is true of minimum-wage laws?

A) They affect skilled workers' wages.
B) They create above-equilibrium wages for some unskilled workers.
C) They create a shortage of unskilled labor.
D) They negatively affect the employment of skilled workers.

Question 68

Explain why the following situation is likely to persist: soccer players in Europe are the highest paid athletes and in the US they are among the lowest paid athletes.

Question 69

Figure 19-2

-Refer to Figure 19-2.This figure depicts labor demand and supply in a nonunionized labor market.The original equilibrium is at point A.If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20,then the employment level

A) increases from 6,000 to 10,000.
B) increases from 3,000 to 10,000.
C) decreases from 10,000 to 3,000.
D) decreases from 6,000 to 3,000.

Question 70

The term "compensating differential" refers to

A) the fact that workers who do similar work should be paid the same wage.
B) the fact that some workers live further from their jobs than do other workers.
C) a wage difference that is distinguishable on the basis of monetary characteristics.
D) a wage difference that arises from nonmonetary characteristics of different jobs.

Question 71

Explain the role that consumers play in perpetuating discrimination in labor markets.

Question 72

Working in a slaughterhouse is much riskier and more unpleasant than working in a bookstore.As a result,we'd expect a difference in wages between the two jobs.The difference is known as

A) an efficiency wage.
B) a compensating differential.
C) a wage adjustment.
D) a minimum wage.

Question 73

Which of the following is not a consequence of above-equilibrium wages in a labor market?

A) a surplus of labor
B) unemployment
C) more unionized jobs
D) All of the above are consequences of above-equilibrium wages.

Question 74

Figure 19-2

-Refer to Figure 19-2.This figure depicts labor demand and supply in a nonunionized labor market.The original equilibrium is at point A.If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20,then there will be an excess

A) supply of 3,000 workers.
B) demand of 7,000 workers.
C) supply of 4,000 workers.
D) supply of 7,000 workers.

Question 75

Figure 19-1

-Refer to Figure 19-1.Suppose the local labor market was in equilibrium to begin with but then the largest local employer decided to change its compensation scheme to $10 as shown.Which of the following compensation schemes could the graph be illustrating?

A) An efficiency wage.
B) Discrimination.
C) A compensating differential.
D) The superstar phenomenon.

Question 76

Above-equilibrium wages caused by efficiency wages will most likely result in

A) a shortage of labor.
B) increased unemployment.
C) compensating wage differentials.
D) an decrease in the quantity of labor supplied.

Question 77

A difference in wages that arises to offset the nonmonetary characteristics of different jobs is known as

A) a compensating differential.
B) an inefficiency wage.
C) the equilibrium difference.
D) a union wage.

Question 78

Figure 19-3
The manufacturing labor market.

-Refer to Figure 19-3.Suppose the manufacturing labor market,which is non-unionized,is in equilibrium at a wage equal to $30.Suppose now that the AFL-CIO (a labor organization)organizes the workers in the manufacturing market and negotiates a wage of $38 per hour.Because of the union,

A) 10 people who were once employed are now unemployed.
B) 20 people who were once employed are now unemployed.
C) 40 people who were once employed are now unemployed.
D) 20 people who were once unemployed are now employed.

Question 79

Effective minimum-wage laws will most likely

A) increase demand for labor.
B) create a surplus of labor.
C) increase incomes for all unskilled workers.
D) decrease incomes for all unskilled workers.

Question 80

Which of the following is the most likely outcome of minimum wage laws?

A) an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms
B) an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms
C) a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms
D) a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms