Question 1

Both Lee and John have got a business degree from a university.They both got jobs as research analysts in the same firm.Two years later Lee is earning more money than John.This wage difference is likely caused by:

Accepted Answer

A) discrimination by the firm 
B) differences in work experience 
C) regulations in the labour market 
D) compensating differentials

Question 2

Comparable worth
In response to the gender gap, some states and countries have experimented with comparable worth regulations.This tries to close the wage gap by requiring employers to pay people doing jobs of comparable worth the same income.Hence, if firemen get paid more than librarians, but regulators deem that the jobs are of comparable wealth, then wages of librarians would have to rise to match firemen.Advocates of comparable worth policies believe that compensating differentials do not explain differences in wages of men and women.One potential critique this principle of comparable worth is that:

Accepted Answer

A) workers are seldom discriminated against 
B) wage differences are unlikely to reflect differences in training or work experience 
C) if non-monetary aspects of a job are difficult to measure, establishing comparable worth will be harder 
D) wage differences are unlikely to reflect differences in risk or difficulty

Question 3

Unions are a type of cartel.

Accepted Answer

A) True 
 B)False

Question 4

Evidence of discrimination in labour markets:

Accepted Answer

A) is more easily identified on the basis of race than gender 
B) is conclusively identified in large differences in average wage rates between men and women 
C) is difficult to verify by reference to differences in average wage rates 
D) has been quantified by economists for most races

Question 5

The alternative to human capital theory that explains why people invest in education argues that:

Accepted Answer

A) schooling just acts as a signal of future ability 
B) university is a place to network with future workers 
C) productivity is not linked to wages 
D) people cannot be considered as 'capital'

Question 6

Compensating differentials are differences in wages that arise from non-monetary characteristics of different jobs.

Accepted Answer

A) True 
 B)False

Question 7

Suppose a forestry firm increases its investment in new technology for its sawmills.The firm employs both skilled and unskilled workers.After this new investment the wage gap between skilled and unskilled workers:

Accepted Answer

A) is likely to be unaltered 
B) is likely to fall 
C) will rise only if marginal productivity of unskilled workers is not altered 
D) is likely to rise

Question 8

Trade unionisation rates in Australia have been:

Accepted Answer

A) trending up 
B) trending down 
C) remained roughly constant 
D) have been fluctuating

Question 9

Most workers in the economy earn a wage that is:

Accepted Answer

A) above the equilibrium wage for their given profession 
B) equal to minimum wage 
C) above the legal minimum wage 
D) less than minimum wage

Question 10

Efficiency wages are above-equilibrium wages paid by firms to encourage productivity and decrease worker turnover.

Accepted Answer

A) True 
 B)False

Question 11

Economists are skeptical about the idea that discrimination is employer-driven for which of the following reasons?

Accepted Answer

A) discrimination does not exist in markets 
B) holding productivity constant, a profit-maximising employer will hire the cheapest labour available 
C) rational employers are profit maximisers 
D) all of the above

Question 12

Which of the following statements represents the idea behind signalling in education?

Accepted Answer

A) the more naturally productive someone is, the more they are inclined to educate themselves 
B) education can turn an unproductive person into a productive person 
C) most university graduates wouldn't be half as productive if it were not for the years they spend in the classroom 
D) all of the above

Question 13

Which of these theories would support the idea that increasing educational levels for all workers would raise all workers' productivity and thereby their wage?

Accepted Answer

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

Question 14

Evidence of differences in average wages of Aboriginal workers compared to white workers:

Accepted Answer

A) is solely indicative of differences in productivity between races 
B) does not alone provide conclusive evidence of discrimination 
C) is seldom used to provide evidence of discriminatory bias 
D) provides conclusive evidence of broad patterns of discrimination on the basis of race

Question 15

Professors often have similar levels of education to lawyers and doctors, but typically get much lower salaries.This difference in income is likely to mean that:

Accepted Answer

A) university education really isn't very valuable 
B) professors do a job that is much more difficult than a doctor or lawyer 
C) professors must receive a compensating wage differential 
D) all of the above are true

Question 16

Empirical work that does not correct wages for differences in productivity of workers is likely to:

Accepted Answer

A) find evidence of wage differentials 
B) be unable to capture evidence of labour market discrimination 
C) misinterpret apparent evidence of labour market discrimination 
D) do all of the above

Question 17

When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:

Accepted Answer

A) market discrimination. 
B) a difference in the value of marginal product of labour 
C) that wages will converge over time 
D) that wage differences reflect social status

Question 18

Advocates of comparable worth would agree with which of the following statements?
(i) compensation should be based on a set of impartial criteria
(ii) wages earned by women are the same as those earned by men who have the same level of training and education
(iii) occupational wage differences are discriminatory against women

Accepted Answer

A) (i) and (iii) only 
B) (i) and (ii) only 
C) (ii) and (iii) only 
D) (i), (ii) and (iii)

Question 19

Which of the following theories suggests that education makes workers more productive and therefore able to earn a higher wage?

Accepted Answer

A) human capital theory 
B) signalling theory 
C) the theory of compensating differentials 
D) cost allocation theory

Question 20

When an employer pays the cost of educating a worker, it is likely that:

Accepted Answer

A) the employer cannot be maximising profit 
B) the employer hopes to recapture its investment in labour productivity increases 
C) the employer is demonstrating altruistic motives 
D) none of the above is true

Exam 20: Earnings, Unions and Discrimination

Both Lee and John have got a business degree from a university.They both got jobs as research analysts in the same firm.Two years later Lee is earning more money than John.This wage difference is likely caused by:

Unions are a type of cartel.

Evidence of discrimination in labour markets:

The alternative to human capital theory that explains why people invest in education argues that:

Compensating differentials are differences in wages that arise from non-monetary characteristics of different jobs.

Suppose a forestry firm increases its investment in new technology for its sawmills.The firm employs both skilled and unskilled workers.After this new investment the wage gap between skilled and unskilled workers:

Trade unionisation rates in Australia have been:

Most workers in the economy earn a wage that is:

Efficiency wages are above-equilibrium wages paid by firms to encourage productivity and decrease worker turnover.

Economists are skeptical about the idea that discrimination is employer-driven for which of the following reasons?

Which of the following statements represents the idea behind signalling in education?

Which of these theories would support the idea that increasing educational levels for all workers would raise all workers' productivity and thereby their wage?

Evidence of differences in average wages of Aboriginal workers compared to white workers:

Professors often have similar levels of education to lawyers and doctors, but typically get much lower salaries.This difference in income is likely to mean that:

Empirical work that does not correct wages for differences in productivity of workers is likely to:

When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:

Which of the following theories suggests that education makes workers more productive and therefore able to earn a higher wage?

When an employer pays the cost of educating a worker, it is likely that: