Question 1

In an economy in which the skills, preferences, and motivations of workers vary widely, equality of wage rates would

Accepted Answer

A) lead to shortages and surpluses of resources and the use of involuntary methods of achieving work participation. 
B) result in a variety of product prices, but overall GDP would be unaffected. 
C) be efficient if the wages were fixed at a high enough level. 
D) reduce the productive incentives of high-skill workers, an effect that would be offset by the increased work effort of low-skill workers. 
A) lead to shortages and surpluses of resources and the use of involuntary methods of achieving work participation. 
B) result in a variety of product prices, but overall GDP would be unaffected. 
C) be efficient if the wages were fixed at a high enough level. 
D) reduce the productive incentives of high-skill workers, an effect that would be offset by the increased work effort of low-skill workers.

Question 2

Which of the following is most likely to reduce the nominal market wage in a job category?

Accepted Answer

A) The job requires employees to work the night shift from 11 p.m. to 7a.m. 
B) The job is prestigious, and the work is quite interesting. 
C) The job is widely viewed as dangerous. 
D) The job requires employees to move from city to city quite often. 
A) The job requires employees to work the night shift from 11 p.m. to 7a.m. 
B) The job is prestigious, and the work is quite interesting. 
C) The job is widely viewed as dangerous. 
D) The job requires employees to move from city to city quite often.

Question 3

Sue: "I much prefer eating at the El Grande Mexican Restaurant to the others in town because all of their employees are Mexican and speak Spanish. It gives the place a real 'authentic' feel." Which of the following is true about the above statement?

Accepted Answer

A) This is an example of customer-based discrimination for one group of employees over another. 
B) Despite customer preferences, we would expect the restaurants in town to hire equally from all racial and ethnic groups. 
C) If many customers felt the same way Sue does, there would be pressure for firms to satisfy this consumer preference in their hiring. 
D) Both a and c are correct. 
A) This is an example of customer-based discrimination for one group of employees over another. 
B) Despite customer preferences, we would expect the restaurants in town to hire equally from all racial and ethnic groups. 
C) If many customers felt the same way Sue does, there would be pressure for firms to satisfy this consumer preference in their hiring. 
D) Both a and c are correct.

Question 4

What is the most probable reason why garbage collectors have higher wages than bookkeepers?

Accepted Answer

A) Employment discrimination 
B) A high unionization rate for bookkeepers 
C) A higher educational requirement for garbage collectors than bookkeepers 
D) The nonmonetary attractiveness of garbage collection causes fewer people to want to be garbage collectors. 
A) Employment discrimination 
B) A high unionization rate for bookkeepers 
C) A higher educational requirement for garbage collectors than bookkeepers 
D) The nonmonetary attractiveness of garbage collection causes fewer people to want to be garbage collectors.

Question 5

Joanne states: "The best way to increase the wages of workers is to increase worker productivity." Is Joanne correct? Why or why not?

Accepted Answer

Joanne is correct. High produc

Question 6

Which of the following is true of America's millionaires?

Accepted Answer

A) Most millionaires inherited at least half of their wealth. 
B) Millionaires are far more likely than others to be self-employed entrepreneurs. 
C) It is virtually impossible to achieve this status by saving and investing over a lengthy period of time. 
D) Only about 20 percent of the millionaires in the United States have college degrees. 
A) Most millionaires inherited at least half of their wealth. 
B) Millionaires are far more likely than others to be self-employed entrepreneurs. 
C) It is virtually impossible to achieve this status by saving and investing over a lengthy period of time. 
D) Only about 20 percent of the millionaires in the United States have college degrees.

Question 7

Suppose that an employer hires workers with blue eyes and workers with brown eyes. Each type of worker has the same productivity. Which of the following is correct if the employer discriminates by offering blue-eyed workers lower wages than brown-eyed workers?

Accepted Answer

A) The employer will be just as cost efficient as a nondiscriminating employer. 
B) The employer will face higher costs than a nondiscriminating employer. 
C) The employer will have lower costs. 
D) The employer will have higher profits. 
E) Both a and c are correct. 
A) The employer will be just as cost efficient as a nondiscriminating employer. 
B) The employer will face higher costs than a nondiscriminating employer. 
C) The employer will have lower costs. 
D) The employer will have higher profits. 
E) Both a and c are correct.

Question 8

Which of the following is true?

Accepted Answer

A) When workers are more productive, the demand for their services will be higher. 
B) In order to earn a large income, one must provide large benefits to others. 
C) High productivity (a large output per hour worked) is the key to high earnings for both individuals and countries. 
D) All of the above are true. 
A) When workers are more productive, the demand for their services will be higher. 
B) In order to earn a large income, one must provide large benefits to others. 
C) High productivity (a large output per hour worked) is the key to high earnings for both individuals and countries. 
D) All of the above are true.

Question 9

Two workers are employed in the same job by the same firm; however, they are paid different wage rates. This could be explained by differences in

Accepted Answer

A) the income effect 
B) the price of the firm's output 
C) their marginal products due to differences in ability 
D) working conditions 
E) risk 
A) the income effect 
B) the price of the firm's output 
C) their marginal products due to differences in ability 
D) working conditions 
E) risk

Question 10

When comparisons are made between the earnings of whites and minorities with the same age, quantity of schooling, marital status, sector of employment, union and industry status, regional location, and annual hours worked, recent studies indicate that

Accepted Answer

A) the corrected earnings of minority men are about two-thirds the earnings of white men. 
B) earnings differentials between whites and minorities are due almost exclusively to employment discrimination. 
C) the corrected earnings of Mexican-Americans, Asian-Americans, and American Indians were between 7 and 9 percent less than the earnings of similar white men. 
D) most minority men now have higher earnings than white men. 
A) the corrected earnings of minority men are about two-thirds the earnings of white men. 
B) earnings differentials between whites and minorities are due almost exclusively to employment discrimination. 
C) the corrected earnings of Mexican-Americans, Asian-Americans, and American Indians were between 7 and 9 percent less than the earnings of similar white men. 
D) most minority men now have higher earnings than white men.

Question 11

Which of the following best explains why productive workers can command high wages?

Accepted Answer

A) the bargaining power of labor unions. 
B) the presence of minimum wage legislation. 
C) wage and price controls that reflect the political power of labor organizations. 
D) competition among employers for productive workers. 
A) the bargaining power of labor unions. 
B) the presence of minimum wage legislation. 
C) wage and price controls that reflect the political power of labor organizations. 
D) competition among employers for productive workers.

Question 12

Firms will only adopt more automated methods of production when

Accepted Answer

A) they reduce the need for workers. 
B) they lower production costs. 
C) they lengthen the production process. 
D) other firms in the industry are doing it. 
A) they reduce the need for workers. 
B) they lower production costs. 
C) they lengthen the production process. 
D) other firms in the industry are doing it.

Question 13

If a firm refuses to hire any minorities due to a personal prejudice, its profits

Accepted Answer

A) will increase markedly. 
B) will decrease. 
C) will not be affected. 
D) will increase slightly. 
A) will increase markedly. 
B) will decrease. 
C) will not be affected. 
D) will increase slightly.

Question 14

Other things constant, when the work opportunities in an occupation are unstable (that is, layoffs are common), the hourly wages of workers in the occupation will tend to be

Accepted Answer

A) higher than the wages of workers with otherwise similar jobs. 
B) lower than the wages of workers with otherwise similar jobs. 
C) below market equilibrium. 
D) above market equilibrium. 
A) higher than the wages of workers with otherwise similar jobs. 
B) lower than the wages of workers with otherwise similar jobs. 
C) below market equilibrium. 
D) above market equilibrium.

Question 15

In an environment of tournament pay, it is quite likely that marginally more productive employees will receive

Accepted Answer

A) less than their marginal revenue product, while less productive employees receive more than theirs. 
B) more than their marginal revenue product, while less productive employees receive less than theirs. 
C) more than their marginal revenue product, as do less productive employees. 
D) less than their marginal revenue product, as do less productive employees. 
A) less than their marginal revenue product, while less productive employees receive more than theirs. 
B) more than their marginal revenue product, while less productive employees receive less than theirs. 
C) more than their marginal revenue product, as do less productive employees. 
D) less than their marginal revenue product, as do less productive employees.

Question 16

A compensation structure that generates much higher pay rates for the top performers, while those whose productivity is only a little lower receive substantially less compensation, is called

Accepted Answer

A) tournament pay. 
B) competing differentials. 
C) dueling executives. 
D) winner take all. 
A) tournament pay. 
B) competing differentials. 
C) dueling executives. 
D) winner take all.

Question 17

If carpentry positions A and B required identical skill levels, other things constant, which one of the following would most likely elevate the wage rate of position A relative to position B?

Accepted Answer

A) The work place of position A is in the intense heat of the sun, whereas the work place of B is air-conditioned. 
B) Position A is a safe office job; position B requires the employee to operate a dangerous saw. 
C) Position A offers steady employment, whereas employees holding position B are often laid off. 
D) Position A offers more sick leave and more paid holidays. 
A) The work place of position A is in the intense heat of the sun, whereas the work place of B is air-conditioned. 
B) Position A is a safe office job; position B requires the employee to operate a dangerous saw. 
C) Position A offers steady employment, whereas employees holding position B are often laid off. 
D) Position A offers more sick leave and more paid holidays.

Question 18

The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that

Accepted Answer

A) worker preferences are an important source of earning differentials. 
B) economics ranks one set of worker preferences as more desirable than another. 
C) some people can be paid less for doing hard work while others have to be paid a premium for doing a similar task. 
D) skill levels of laborers are a minor consideration in wage rate determination. 
A) worker preferences are an important source of earning differentials. 
B) economics ranks one set of worker preferences as more desirable than another. 
C) some people can be paid less for doing hard work while others have to be paid a premium for doing a similar task. 
D) skill levels of laborers are a minor consideration in wage rate determination.

Question 19

Economic theory suggests that college graduates receive higher wages than those with only a high school education because

Accepted Answer

A) college graduates are more productive. 
B) college graduates must be paid higher wages because their educational costs were higher. 
C) college graduates have formed stronger unions. 
D) the supply of high school graduates is small relative to the demand for their labor. 
A) college graduates are more productive. 
B) college graduates must be paid higher wages because their educational costs were higher. 
C) college graduates have formed stronger unions. 
D) the supply of high school graduates is small relative to the demand for their labor.

Question 20

Which of the following best states the relationship between machinery and the earnings of labor?

Accepted Answer

A) Machines tend to reduce the demand for labor, thereby reducing the earnings rate of labor. 
B) Production of machinery creates jobs, thereby increasing the demand for (and wages of) labor. 
C) High productivity per worker hour is a necessary ingredient for the attainment of high real earnings, and adoption of labor-saving machinery enhances the ability of labor to attain such high productivity. 
D) Output and real earnings can always be increased whenever a machine can be substituted for a function previously performed by labor. 
A) Machines tend to reduce the demand for labor, thereby reducing the earnings rate of labor. 
B) Production of machinery creates jobs, thereby increasing the demand for (and wages of) labor. 
C) High productivity per worker hour is a necessary ingredient for the attainment of high real earnings, and adoption of labor-saving machinery enhances the ability of labor to attain such high productivity. 
D) Output and real earnings can always be increased whenever a machine can be substituted for a function previously performed by labor.

Exam 13: Earnings, Productivity, and the Job Market

In an economy in which the skills, preferences, and motivations of workers vary widely, equality of wage rates would

Which of the following is most likely to reduce the nominal market wage in a job category?

Sue: "I much prefer eating at the El Grande Mexican Restaurant to the others in town because all of their employees are Mexican and speak Spanish. It gives the place a real 'authentic' feel." Which of the following is true about the above statement?

What is the most probable reason why garbage collectors have higher wages than bookkeepers?

Joanne states: "The best way to increase the wages of workers is to increase worker productivity." Is Joanne correct? Why or why not?

Which of the following is true of America's millionaires?

Suppose that an employer hires workers with blue eyes and workers with brown eyes. Each type of worker has the same productivity. Which of the following is correct if the employer discriminates by offering blue-eyed workers lower wages than brown-eyed workers?

Which of the following is true?

Two workers are employed in the same job by the same firm; however, they are paid different wage rates. This could be explained by differences in

When comparisons are made between the earnings of whites and minorities with the same age, quantity of schooling, marital status, sector of employment, union and industry status, regional location, and annual hours worked, recent studies indicate that

Which of the following best explains why productive workers can command high wages?

Firms will only adopt more automated methods of production when

If a firm refuses to hire any minorities due to a personal prejudice, its profits

Other things constant, when the work opportunities in an occupation are unstable (that is, layoffs are common), the hourly wages of workers in the occupation will tend to be

In an environment of tournament pay, it is quite likely that marginally more productive employees will receive

A compensation structure that generates much higher pay rates for the top performers, while those whose productivity is only a little lower receive substantially less compensation, is called

If carpentry positions A and B required identical skill levels, other things constant, which one of the following would most likely elevate the wage rate of position A relative to position B?

The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that

Economic theory suggests that college graduates receive higher wages than those with only a high school education because

Which of the following best states the relationship between machinery and the earnings of labor?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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