Question 1

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

Accepted Answer

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

Question 2

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.

Question 3

Cory has just graduated from veterinary school. He can earn $40,000 working at a small animal clinic or $50,000 working with farm animals and horses where the risks of getting injured by an animal are higher. The higher salary to work with larger animals is an example of

Accepted Answer

A) a compensating differential. 
B) signaling theory. 
C) an efficiency wage. 
D) efficient union bargaining.

Question 4

The idea of paying workers an efficiency wage is that

Accepted Answer

A) employers will find it profitable to hire more workers. 
B) workers receive wages consistent with their specific compensating differentials. 
C) workers and management gain at the expense of the stockholders of the company. 
D) workers have the incentive to work harder, thus increasing their marginal productivity.

Question 5

Scenario 19-1
Ferris B., a student at a community college, is considering what he should do for summer employment. Two recruiters show up at his school in search of summer workers. Recruiter A is looking for lifeguards to patrol the beach at an exclusive island resort in the Caribbean. Recruiter B is looking for workers to staff positions at a summer youth camp.
-Refer to Scenario 19-1. Ferris is carefully considering the options that each recruiter presents. On the basis of knowledge obtained in his economics class, Ferris concludes that

Accepted Answer

A) the lifeguard job will be more fun than the summer camp job, so the wage for that job will be higher than otherwise. 
B) if the summer camp job doesn't require any special skills, the wage for that job will be lower than otherwise. 
C) since the summer camp job requires some night shift work, the wage for that job will be lower than otherwise. 
D) All of the above are correct.

Question 6

As a summer job, some teenagers choose to detassle corn, a job requiring long hours walking corn fields in the summer heat. Other teens take jobs working as lifeguards. Given that detassling corn is a more difficult job than working as a lifeguard, we would expect a difference in wages between the two jobs. This difference is known as

Accepted Answer

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

Question 7

Sometimes wages are set above the equilibrium level when firms pay

Accepted Answer

A) workers with more seniority higher wages than newly-hired workers. 
B) efficiency wages to reduce turnover. 
C) compensating differentials to workers who work the night shift. 
D) more attractive salespeople higher wages than less attractive salespeople.

Question 8

It is argued that competitive markets provide a "natural remedy" to discriminatory wage practices. Which of the following is widely recognized as a potential limit to the potency of that natural remedy?

Accepted Answer

A) Governments sometimes mandate discriminatory practices. 
B) Some employees have a lot of job experience; others have little job experience. 
C) In a discriminatory environment, a competitive firm that takes prices and wages as given has nothing to gain from any particular choice it makes regarding who to hire or which customers to serve. 
D) Not all firms exhibit social responsibility in sufficient measure to counter discriminatory wage practices.

Question 9

John has financial assets totaling $1.5 million, and he plans to use these assets to start his own business. Since John owns these funds and will not need to borrow to start his business, these assets are considered human capital.

Accepted Answer

A) True 
 B)False

Question 10

Economists are skeptical that discrimination is employer driven because

Accepted Answer

A) discrimination cannot exist in markets. 
B) employers are not really interested in maximizing profit. 
C) employers typically base wages paid on the prevailing market wage. 
D) holding productivity constant, a profit-maximizing employer will hire the cheapest labor available.

Question 11

The differences in the desirability of different jobs within a company could give rise to a compensating differential between workers.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Economists found evidence of discrimination in each of the following markets except

Accepted Answer

A) 1960s baseball games 
B) baseball cards 
C) live basketball games in the 1980s 
D) current era baseball games

Question 14

The economic theory of labor markets suggests that wages are determined by labor supply and labor demand.

Accepted Answer

A) True 
 B)False

Question 15

Harry is 40 and black. Dan is 40 and white. Both work as plumbers, but Harry earns more.

Accepted Answer

A) Dan is being discriminated against. 
B) Harry might be discriminated against if he has more experience as a plumber. 
C) Harry might be discriminated against if he has less training as a plumber. 
D) Harry might be discriminated against if he works the day shift and Dan works the night shift.

Question 16

Mary and Mike are twins who attended grammar school through college together. Both twins got jobs in the same department of an accounting firm. They both work equally hard and have received similar performance reviews. Mary earns $62,000 a year, and Mike earns $80,000 a year. Select the best explanation for this wage difference.

Accepted Answer

A) Mary has less human capital than Mike. 
B) Mary has more human capital than Mike. 
C) Mike has been discriminated against because he is male. 
D) Mary has been discriminated against because she is female.

Question 17

Which theory is supportive of the idea that increasing educational levels for all workers would raise all workers' productivity and therefore their wages?

Accepted Answer

A) the theory of compensating differentials 
B) the efficient-market hypothesis 
C) human-capital theory 
D) signaling theory

Question 18

Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by

Accepted Answer

A) race. 
B) level of education. 
C) attitudes toward risk. 
D) All of the above are forms of discrimination.

Question 19

Some economists are skeptical of the argument that employers are responsible for discriminatory wage differences. They argue that market economies provide a natural remedy to employer discrimination, and that remedy is

Accepted Answer

A) social responsibility. 
B) the profit motive. 
C) fear of reprisal from groups that suffer from those wage differences. 
D) fear of reprisal from government in the form of prosecution.

Question 20

In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was significantly higher than what any other organization offered. Henry Ford believed that this wage would make his employees happier, increase their productivity, and lower employee turnover. Economists would say that Mr. Ford offered his employees

Accepted Answer

A) a union. 
B) an efficiency wage. 
C) a diminishing rate of marginal return. 
D) a leisure wage.

Exam 19: Earnings and Discrimination

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

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

Cory has just graduated from veterinary school. He can earn $40,000 working at a small animal clinic or $50,000 working with farm animals and horses where the risks of getting injured by an animal are higher. The higher salary to work with larger animals is an example of

The idea of paying workers an efficiency wage is that

Sometimes wages are set above the equilibrium level when firms pay

It is argued that competitive markets provide a "natural remedy" to discriminatory wage practices. Which of the following is widely recognized as a potential limit to the potency of that natural remedy?

John has financial assets totaling $1.5 million, and he plans to use these assets to start his own business. Since John owns these funds and will not need to borrow to start his business, these assets are considered human capital.

Economists are skeptical that discrimination is employer driven because

The differences in the desirability of different jobs within a company could give rise to a compensating differential between workers.

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

Economists found evidence of discrimination in each of the following markets except

The economic theory of labor markets suggests that wages are determined by labor supply and labor demand.

Harry is 40 and black. Dan is 40 and white. Both work as plumbers, but Harry earns more.

Which theory is supportive of the idea that increasing educational levels for all workers would raise all workers' productivity and therefore their wages?

Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by

Some economists are skeptical of the argument that employers are responsible for discriminatory wage differences. They argue that market economies provide a natural remedy to employer discrimination, and that remedy is