Question 1

In what way do competitive markets have a "natural remedy" for discriminatory hiring practices?

Accepted Answer

A)  Governments regulate to resolve problems of discrimination. 
B)  Profit-maximizing firms that do not discriminate tend to replace firms that discriminate. 
C)  Wages paid to groups that are victimized by discrimination are eventually bid up to above-equilibrium levels. 
D)  Discrimination is usually the outcome of rational decision-making processes, and competitive markets produce rational outcomes. 
A)  Governments regulate to resolve problems of discrimination. 
B)  Profit-maximizing firms that do not discriminate tend to replace firms that discriminate. 
C)  Wages paid to groups that are victimized by discrimination are eventually bid up to above-equilibrium levels. 
D)  Discrimination is usually the outcome of rational decision-making processes, and competitive markets produce rational outcomes.

Question 2

First grade teachers who work in Lynn, Massachusetts's (a large, low income city north of Boston) public schools earn more than first grade teachers who work in private schools in more affluent communities north of Boston. Lynn teachers belong to a teachers' union. Which statement best explains the scenario described above?

Accepted Answer

A)  Lynn school teachers receive a compensating differential because they work in a more difficult environment, and they receive higher than market equilibrium wages because they are members of a teachers' union. 
B)  Lynn school teachers receive a compensating differential because they work in a more difficult environment, but they do not receive higher than market equilibrium wages because they are members of a teachers' union. 
C)  Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, but they do receive higher than market equilibrium wages because they are members of a teachers' union. 
D)  Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, and they do not receive higher than market equilibrium wages because they are members of a teachers' union. 
A)  Lynn school teachers receive a compensating differential because they work in a more difficult environment, and they receive higher than market equilibrium wages because they are members of a teachers' union. 
B)  Lynn school teachers receive a compensating differential because they work in a more difficult environment, but they do not receive higher than market equilibrium wages because they are members of a teachers' union. 
C)  Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, but they do receive higher than market equilibrium wages because they are members of a teachers' union. 
D)  Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, and they do not receive higher than market equilibrium wages because they are members of a teachers' union.

Question 3

Which of the following is the most important contributor to human capital?

Accepted Answer

A)  education 
B)  effort 
C)  chance 
D)  physical strength 
A)  education 
B)  effort 
C)  chance 
D)  physical strength

Question 4

The profit motive counteracts

Accepted Answer

A)  consumer discrimination. 
B)  discrimination in sports. 
C)  the beauty premium. 
D)  None of the above is correct. 
A)  consumer discrimination. 
B)  discrimination in sports. 
C)  the beauty premium. 
D)  None of the above is correct.

Question 5

According to proponents of the signaling theory of education,

Accepted Answer

A)  schooling has no real productivity benefit. 
B)  no one person finds it easier to earn a college degree than does any other person. 
C)  the human-capital view of education is entirely correct. 
D)  employers send signals to young people to persuade them to expend whatever effort is necessary to earn college degrees. 
A)  schooling has no real productivity benefit. 
B)  no one person finds it easier to earn a college degree than does any other person. 
C)  the human-capital view of education is entirely correct. 
D)  employers send signals to young people to persuade them to expend whatever effort is necessary to earn college degrees.

Question 6

According to evidence provided by the U.S. government, the median black

Accepted Answer

A)  woman is paid roughly the same as the median white woman. 
B)  woman is paid roughly the same as the median black man. 
C)  man is paid 21 percent less than the median white man. 
D)  All of the above are correct. 
A)  woman is paid roughly the same as the median white woman. 
B)  woman is paid roughly the same as the median black man. 
C)  man is paid 21 percent less than the median white man. 
D)  All of the above are correct.

Question 7

The time spent by students in college

Accepted Answer

A)  leads to lower lifetime earnings because opportunity costs are high. 
B)  is an investment in human capital. 
C)  decreases human capital by lowering work experience. 
D)  increases as the wages paid to low-skilled workers rise. 
A)  leads to lower lifetime earnings because opportunity costs are high. 
B)  is an investment in human capital. 
C)  decreases human capital by lowering work experience. 
D)  increases as the wages paid to low-skilled workers rise.

Question 8

Education raises wages because the demanders of labor

Accepted Answer

A)  are willing to pay more for highly educated workers who have higher marginal products and the suppliers of labor are willing to pay the cost of becoming educated only if they are rewarded. 
B)  are willing to pay the cost of becoming educated only if they are rewarded and the suppliers of labor are willing to pay more for highly educated workers who have higher marginal products. 
C)  require fewer workers if they are highly educated. 
D)  None of the above is correct. 
A)  are willing to pay more for highly educated workers who have higher marginal products and the suppliers of labor are willing to pay the cost of becoming educated only if they are rewarded. 
B)  are willing to pay the cost of becoming educated only if they are rewarded and the suppliers of labor are willing to pay more for highly educated workers who have higher marginal products. 
C)  require fewer workers if they are highly educated. 
D)  None of the above is correct.

Question 9

If an employer pays a man a higher wage than a woman, the employer

Accepted Answer

A)  is discriminating against the woman but is still maximizing profit. 
B)  is not discriminating against the woman. 
C)  may or may not be discriminating against the woman. 
D)  is discriminating against the woman and is not maximizing profit. 
A)  is discriminating against the woman but is still maximizing profit. 
B)  is not discriminating against the woman. 
C)  may or may not be discriminating against the woman. 
D)  is discriminating against the woman and is not maximizing profit.

Question 10

The theory of efficiency wages suggests that

Accepted Answer

A)  above-equilibrium wages increase worker productivity. 
B)  workers with higher levels of education earn more than workers with lower levels of education. 
C)  workers signal their high ability to potential employers by completing formal years of schooling. 
D)  union workers earn more than nonunion workers. 
A)  above-equilibrium wages increase worker productivity. 
B)  workers with higher levels of education earn more than workers with lower levels of education. 
C)  workers signal their high ability to potential employers by completing formal years of schooling. 
D)  union workers earn more than nonunion workers.

Question 11

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 $10. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $12.50, then employment is

Accepted Answer

A)  500 
B)  600 
C)  700 
D)  800 
A)  500 
B)  600 
C)  700 
D)  800

Question 12

Which of the following is not correct?

Accepted Answer

A)  Some economists believe that business owners who emphasize profit maximization will hire the most productive workers regardless of the personal characteristics of the worker; hence, these firms will drive discriminating firms out of business. 
B)  Two economists found that employers in Boston and Chicago were about 50 percent more likely to interview job applicants named Emily and Greg than those named Lakisha and Jamal. 
C)  Two economists found that women were less likely to participate in an experiment where they were paid based on math skills but more likely to participate when they were paid based on reading skills; men were more likely to participate when they were paid based on math skills and less likely to participate when they were paid based on reading skills. 
D)  Economists found that the prices of older baseball cards were about 10 percent lower when the player was black rather than white. 
A)  Some economists believe that business owners who emphasize profit maximization will hire the most productive workers regardless of the personal characteristics of the worker; hence, these firms will drive discriminating firms out of business. 
B)  Two economists found that employers in Boston and Chicago were about 50 percent more likely to interview job applicants named Emily and Greg than those named Lakisha and Jamal. 
C)  Two economists found that women were less likely to participate in an experiment where they were paid based on math skills but more likely to participate when they were paid based on reading skills; men were more likely to participate when they were paid based on math skills and less likely to participate when they were paid based on reading skills. 
D)  Economists found that the prices of older baseball cards were about 10 percent lower when the player was black rather than white.

Question 13

Workers who work the night shift at factories are paid more than similar workers who work the day shift due to a

Accepted Answer

compensati

Question 14

Which of the following can be used to help explain wage differences among different groups of workers?

Accepted Answer

A)  human capital acquired through education 
B)  human capital acquired through job experience 
C)  compensating differentials 
D)  All of the above can explain wage differences. 
A)  human capital acquired through education 
B)  human capital acquired through job experience 
C)  compensating differentials 
D)  All of the above can explain wage differences.

Question 15

Firms that operate in competitive product markets and choose to practice discrimination in hiring workers

Accepted Answer

A)  will survive if they increase production and garner a larger market share. 
B)  will eventually earn zero economic profits. 
C)  will survive as long as they are willing to have a smaller market share. 
D)  are likely to eventually go out of business. 
A)  will survive if they increase production and garner a larger market share. 
B)  will eventually earn zero economic profits. 
C)  will survive as long as they are willing to have a smaller market share. 
D)  are likely to eventually go out of business.

Question 16

Figure 19-6  
-Refer to Figure 19-6. Given demand, D1, and supply, S2, how many workers are unemployed if a minimum wage of $8 per hour is imposed on this market?

Accepted Answer

The answer of Figure 19-6  
-Refer to Figure 19-6....

Question 17

Which of the following statements is not correct?

Accepted Answer

A)  If the signaling theory of education is correct, additional schooling does not affect worker productivity but rather signals a correlation between natural ability and education. 
B)  The theory of efficiency wages 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)  The theory of compensating wage differentials reflects the different skills, abilities, and productivity of workers. 
A)  If the signaling theory of education is correct, additional schooling does not affect worker productivity but rather signals a correlation between natural ability and education. 
B)  The theory of efficiency wages 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)  The theory of compensating wage differentials reflects the different skills, abilities, and productivity of workers.

Question 18

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 $8 as shown. Which of the following compensation schemes could the graph be illustrating?

Accepted Answer

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

Question 19

Figure 19-6  
-Refer to Figure 19-6. Given demand, D1, and supply, S1, if wages adjust to balance labor supply and labor demand, what are the wage and quantity of labor?

Accepted Answer

The answer of Figure 19-6  
-Refer to Figure 19-6....

Question 20

Some economists suggest that increased international trade with countries that have a greater proportion of unskilled workers has led to an expanding wage gap between high-skill and low-skill workers in the United States.

Accepted Answer

A) True 
 B)False

Exam 19: Earnings and Discrimination

In what way do competitive markets have a "natural remedy" for discriminatory hiring practices?

Which of the following is the most important contributor to human capital?

The profit motive counteracts

According to proponents of the signaling theory of education,

According to evidence provided by the U.S. government, the median black

The time spent by students in college

Education raises wages because the demanders of labor

If an employer pays a man a higher wage than a woman, the employer

The theory of efficiency wages suggests that

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 $10. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $12.50, then employment is

Which of the following is not correct?

Workers who work the night shift at factories are paid more than similar workers who work the day shift due to a

Which of the following can be used to help explain wage differences among different groups of workers?

Firms that operate in competitive product markets and choose to practice discrimination in hiring workers

Figure 19-6 -Refer to Figure 19-6. Given demand, D1, and supply, S2, how many workers are unemployed if a minimum wage of $8 per hour is imposed on this market?

Which of the following statements is not correct?

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 $8 as shown. Which of the following compensation schemes could the graph be illustrating?

Figure 19-6 -Refer to Figure 19-6. Given demand, D1, and supply, S1, if wages adjust to balance labor supply and labor demand, what are the wage and quantity of labor?

Some economists suggest that increased international trade with countries that have a greater proportion of unskilled workers has led to an expanding wage gap between high-skill and low-skill workers in the United States.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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