Question 1

The difference in wages paid to major-league baseball players and minor-league baseball players is most likely due to

Accepted Answer

A)  differences in chance. 
B)  differences in natural ability. 
C)  the fact that the players' union is strong. 
D)  a compensating differential. 
A)  differences in chance. 
B)  differences in natural ability. 
C)  the fact that the players' union is strong. 
D)  a compensating differential.

Question 2

The belief that education makes a person more productive and thereby raises his or her wage is referred to as the

Accepted Answer

A)  signaling view of education. 
B)  natural-ability view of education. 
C)  unmeasured-variables view of education. 
D)  human-capital view of education. 
A)  signaling view of education. 
B)  natural-ability view of education. 
C)  unmeasured-variables view of education. 
D)  human-capital view of education.

Question 3

George and Susan work at the same brewery. George works in advertising. Susan works as a forewoman in the bottling plant. George is paid more than Susan.

Accepted Answer

A)  Because the male worker earns a higher salary than the female worker, the employer must be discriminating against women. 
B)  If George has better performance reviews than Susan, the company might be rewarding George for his high productivity. 
C)  If forepersons at bottling plants typically earn more than employees in the advertising department, then the brewery must be discriminating against women. 
D)  George might be earning more because he works the day shift while Susan works the night shift. 
A)  Because the male worker earns a higher salary than the female worker, the employer must be discriminating against women. 
B)  If George has better performance reviews than Susan, the company might be rewarding George for his high productivity. 
C)  If forepersons at bottling plants typically earn more than employees in the advertising department, then the brewery must be discriminating against women. 
D)  George might be earning more because he works the day shift while Susan works the night shift.

Question 4

Philip is an average contractor in town, and he earns $40,000 a year. Billy is the best contractor in town, and he earns $480,000 a year. Philip's contracting services

Accepted Answer

A)  are valued more by the market relative to Billy's and that explains why his income is higher than Billy's. 
B)  are valued less by the market relative to Billy's and that explains why his income is higher than Billy's. 
C)  are valued less by the market relative to Billy's and that explains why his income is lower than Billy's. 
D)  are more expensive because he receives a compensating differential. 
A)  are valued more by the market relative to Billy's and that explains why his income is higher than Billy's. 
B)  are valued less by the market relative to Billy's and that explains why his income is higher than Billy's. 
C)  are valued less by the market relative to Billy's and that explains why his income is lower than Billy's. 
D)  are more expensive because he receives a compensating differential.

Question 5

The theory of efficiency wages challenges the assumption that

Accepted Answer

A)  workers are efficient. 
B)  workers have an incentive to shirk their responsibilities to their employers. 
C)  wages must always adjust to balance labor supply and labor demand. 
D)  firms sometimes choose to pay their workers above-equilibrium wages. 
A)  workers are efficient. 
B)  workers have an incentive to shirk their responsibilities to their employers. 
C)  wages must always adjust to balance labor supply and labor demand. 
D)  firms sometimes choose to pay their workers above-equilibrium wages.

Question 6

Which of the following is an economic explanation for the "beauty premium"?

Accepted Answer

A)  Employers pay very attractive women less than average-looking women because they believe them to be less intelligent. 
B)  Employers pay above-average-looking men more than above-average-looking women. 
C)  Employers pay above-average-looking women more than average-looking women because customers prefer to deal with better-looking women. 
D)  Employers pay above-average-looking men more because they signal to the market that they are willing to spend more money on personal grooming, a sign of wealth and stability. 
A)  Employers pay very attractive women less than average-looking women because they believe them to be less intelligent. 
B)  Employers pay above-average-looking men more than above-average-looking women. 
C)  Employers pay above-average-looking women more than average-looking women because customers prefer to deal with better-looking women. 
D)  Employers pay above-average-looking men more because they signal to the market that they are willing to spend more money on personal grooming, a sign of wealth and stability.

Question 7

Sometimes wages are set above the equilibrium level when

Accepted Answer

A)  garbage collectors earn higher wages than secretaries due to compensating differentials. 
B)  accountants earn more than dental technicians due to higher educational requirements. 
C)  movie superstars earn more than talented plumbers. 
D)  unions negotiate higher wages by threatening to strike. 
A)  garbage collectors earn higher wages than secretaries due to compensating differentials. 
B)  accountants earn more than dental technicians due to higher educational requirements. 
C)  movie superstars earn more than talented plumbers. 
D)  unions negotiate higher wages by threatening to strike.

Question 8

Between 1975 and 2011, the wage gap between women with a high school education and women with a college education increased. In particular, in 2011 women with a college degree earned about

Accepted Answer

A)  12% more than women with a high school education. 
B)  26% more than women with a high school education. 
C)  70% more than women with a high school education. 
D)  81% more than women with a high school education. 
A)  12% more than women with a high school education. 
B)  26% more than women with a high school education. 
C)  70% more than women with a high school education. 
D)  81% more than women with a high school education.

Question 9

According to the signaling view, education

Accepted Answer

A)  has no effect on lifetime earnings. 
B)  alters work ethic. 
C)  enhances productivity. 
D)  is an indicator of natural ability. 
A)  has no effect on lifetime earnings. 
B)  alters work ethic. 
C)  enhances productivity. 
D)  is an indicator of natural ability.

Question 10

In the early twentieth century, racial segregation of streetcars in the southern cities was largely opposed by

Accepted Answer

A)  streetcar firms. 
B)  government officials. 
C)  Federal lawyers applying the Sherman antitrust laws. 
D)  consumers. 
A)  streetcar firms. 
B)  government officials. 
C)  Federal lawyers applying the Sherman antitrust laws. 
D)  consumers.

Question 11

Tiffany is a black 21-year-old female, and Danielle is a black 41-year-old female. Both Tiffany and Danielle were accounting majors, and they graduated from the same college with the same GPA - Tiffany in 2013 and Danielle in 1992. Tiffany and Danielle are both auditors at the same accounting firm. Tiffany earns $63,000 a year, and Danielle earns $95,000 a year. Select the best explanation for this wage difference.

Accepted Answer

A)  Tiffany has more human capital than Danielle. 
B)  Tiffany has less human capital than Danielle. 
C)  Tiffany has been discriminated against because she is young. 
D)  Danielle has been discriminated against because she is old. 
A)  Tiffany has more human capital than Danielle. 
B)  Tiffany has less human capital than Danielle. 
C)  Tiffany has been discriminated against because she is young. 
D)  Danielle has been discriminated against because she is old.

Question 12

Scenario 19-3
In the small town of Hamilton, Montana, there is a local hardware store called Eddy's Hardware. There are only two types of workers who apply for jobs at Eddy's Hardware: cowboys and farm boys. Local politicians have received numerous complaints that Eddy's Hardware is practicing wage discrimination against farm boys. Eddy's Hardware denies the complaint and says the store is only trying to maximize profit.
-Refer to Scenario 19-3. Which of the following statements would weaken the discrimination complaint against Eddy's Hardware?

Accepted Answer

A)  Farm boys are more productive than cowboys. 
B)  Farm boys work longer hours than cowboys and their effort is greater. 
C)  Farm boys are generally less educated than cowboys in the field of hardware. 
D)  All of the above would weaken the discrimination complaint. 
A)  Farm boys are more productive than cowboys. 
B)  Farm boys work longer hours than cowboys and their effort is greater. 
C)  Farm boys are generally less educated than cowboys in the field of hardware. 
D)  All of the above would weaken the discrimination complaint.

Question 13

In the United States, the earnings gap between workers with college degrees and workers with high school degrees

Accepted Answer

A)  has never been documented by reliable evidence. 
B)  is evident, but it has remained roughly constant over the past several years. 
C)  is evident, but it has diminished over the last several years. 
D)  is evident, and it has widened over the last several years. 
A)  has never been documented by reliable evidence. 
B)  is evident, but it has remained roughly constant over the past several years. 
C)  is evident, but it has diminished over the last several years. 
D)  is evident, and it has widened over the last several years.

Question 14

Which of the following statements is not correct?

Accepted Answer

A)  Both the human capital theory and the signaling theory of education could explain why college graduates earn more than high school graduates. 
B)  The signaling theory of education suggests that the ability to complete a college degree is correlated with the ability to perform well in the labor market. 
C)  If the human capital theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages. 
D)  If the signaling theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages. 
A)  Both the human capital theory and the signaling theory of education could explain why college graduates earn more than high school graduates. 
B)  The signaling theory of education suggests that the ability to complete a college degree is correlated with the ability to perform well in the labor market. 
C)  If the human capital theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages. 
D)  If the signaling theory of education is correct, a government policy that pays for additional schooling for all workers would not increase wages.

Question 15

Which of the following statements can be called a productivity-revealing theory?

Accepted Answer

A)  human-capital theory and signaling theory 
B)  human-capital theory but not signaling theory 
C)  signaling theory but not human-capital theory 
D)  neither human-capital theory nor signaling theory 
A)  human-capital theory and signaling theory 
B)  human-capital theory but not signaling theory 
C)  signaling theory but not human-capital theory 
D)  neither human-capital theory nor signaling theory

Question 16

Discrimination by a manager in the hiring process

Accepted Answer

A)  decreases the firm's costs. 
B)  increases the firm's costs. 
C)  is evident if a white manager refuses to hire a certain black applicant. 
D)  is evident if a male manager fails to hire a certain female applicant. 
A)  decreases the firm's costs. 
B)  increases the firm's costs. 
C)  is evident if a white manager refuses to hire a certain black applicant. 
D)  is evident if a male manager fails to hire a certain female applicant.

Question 17

Which of the following does not explain the "beauty premium" differences in wages?

Accepted Answer

A)  Better-looking people are preferred by customers; thus, employers will pay them higher wages than average- looking people. 
B)  Beauty may be an indirect measure of other abilities that employers value. 
C)  Average-looking people are preferred by customers; thus, employers will pay them higher wages than better- looking people. 
D)  Employers discriminate in favor of better-looking people. 
A)  Better-looking people are preferred by customers; thus, employers will pay them higher wages than average- looking people. 
B)  Beauty may be an indirect measure of other abilities that employers value. 
C)  Average-looking people are preferred by customers; thus, employers will pay them higher wages than better- looking people. 
D)  Employers discriminate in favor of better-looking people.

Question 18

Most economists believe that the higher average salaries earned by men in comparison to women arise from

Accepted Answer

A)  discrimination. 
B)  a variety of factors, including differences in human capital and compensating differentials; few economists believe that gender discrimination in earnings exists. 
C)  differences in human capital as the primary reason. 
D)  a variety of factors, including differences in human capital, compensating differentials, and discrimination. 
A)  discrimination. 
B)  a variety of factors, including differences in human capital and compensating differentials; few economists believe that gender discrimination in earnings exists. 
C)  differences in human capital as the primary reason. 
D)  a variety of factors, including differences in human capital, compensating differentials, and discrimination.

Question 19

A study of segregated streetcars in the southern United States in the early twentieth century found which of the following?

Accepted Answer

A)  Firms that ran the streetcars were more interested in segregating customers by race than profits. 
B)  The firms that ran the streetcars were unanimous in their support of laws that required segregation of races. 
C)  Before the passage of laws that mandated segregation of races on streetcars, segregation of smokers and nonsmokers was more common than segregation of races. 
D)  Segregation based on gender was more common than race at first. 
A)  Firms that ran the streetcars were more interested in segregating customers by race than profits. 
B)  The firms that ran the streetcars were unanimous in their support of laws that required segregation of races. 
C)  Before the passage of laws that mandated segregation of races on streetcars, segregation of smokers and nonsmokers was more common than segregation of races. 
D)  Segregation based on gender was more common than race at first.

Question 20

The fact that movie star Angelina Jolie's salary is much higher than the salary earned by the world's best nurse can best be explained by the

Accepted Answer

A)  failure of the market to reward talent fairly. 
B)  large number of nurses. 
C)  willingness of some people to accept a lower wage rate in order to do work they find personally rewarding. 
D)  superstar phenomenon. 
A)  failure of the market to reward talent fairly. 
B)  large number of nurses. 
C)  willingness of some people to accept a lower wage rate in order to do work they find personally rewarding. 
D)  superstar phenomenon.

Exam 19: Earnings and Discrimination

The difference in wages paid to major-league baseball players and minor-league baseball players is most likely due to

The belief that education makes a person more productive and thereby raises his or her wage is referred to as the

George and Susan work at the same brewery. George works in advertising. Susan works as a forewoman in the bottling plant. George is paid more than Susan.

Philip is an average contractor in town, and he earns $40,000 a year. Billy is the best contractor in town, and he earns $480,000 a year. Philip's contracting services

The theory of efficiency wages challenges the assumption that

Which of the following is an economic explanation for the "beauty premium"?

Sometimes wages are set above the equilibrium level when

Between 1975 and 2011, the wage gap between women with a high school education and women with a college education increased. In particular, in 2011 women with a college degree earned about

According to the signaling view, education

In the early twentieth century, racial segregation of streetcars in the southern cities was largely opposed by

In the United States, the earnings gap between workers with college degrees and workers with high school degrees

Which of the following statements is not correct?

Which of the following statements can be called a productivity-revealing theory?

Discrimination by a manager in the hiring process

Which of the following does not explain the "beauty premium" differences in wages?

Most economists believe that the higher average salaries earned by men in comparison to women arise from

A study of segregated streetcars in the southern United States in the early twentieth century found which of the following?

The fact that movie star Angelina Jolie's salary is much higher than the salary earned by the world's best nurse can best be explained by the

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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