Chapter.20 Earnings And Discrimination Full Test Bank - Principles of Microeconomics ANZ Edition Test Bank by Joshua Gans. DOCX document preview.
CHAPTER 20 – Earnings and discrimination
TRUE/FALSE
1. Workers with more human capital will always earn more than those with less human capital.
DIF: Moderate TOP: Human capital
2. The rising gap in wages between unskilled and skilled workers is most likely related to a larger increase in demand for skilled occupations relative to unskilled occupations.
DIF: Easy TOP: Human capital
3. A person will only invest in education if it leads to a higher wage.
DIF: Easy TOP: Human capital
4. Discrimination is a reflection of some people’s prejudice against certain groups in society.
DIF: Easy TOP: Measuring labour-market discrimination
5. Sales commissions encourage workers to put in more effort, which raises their marginal product.
DIF: Easy TOP: Ability, effort and chance
6. A binding minimum wage law will decrease the quantity of labour demanded.
DIF: Easy TOP: Unions as monopolists
7. Efficiency wages are above-equilibrium wages paid by firms to encourage productivity and decrease worker turnover.
DIF: Easy TOP: Are unions good or bad for the economy?
8. Labour unions will generally decrease the quantity of labour demanded.
DIF: Easy TOP: Unions as monopolists
9. Wage differentials are often caused by differences in education, experience and the willingness to take on dangerous or unpleasant tasks by workers.
DIF: Moderate TOP: Case study: The benefits of beauty
10. Politicians often point to wage differentials as evidence of labour market discrimination against ethnic minorities and women; however, economists argue against this approach because people differ in the kinds of work they are willing and able to do.
DIF: Moderate TOP: Measuring labour-market discrimination
11. Economists would argue that the gender wage gap is narrowing because of efficiency wages.
DIF: Moderate TOP: Measuring labour-market discrimination
12. Forestry worker wages are often higher than other low-skilled work because of the higher risks of injury or death.
DIF: Easy TOP: Compensating differentials
13. People who leave school with no qualifications typically have less human capital than those workers with university qualifications.
DIF: Easy TOP: Compensating differentials
14. The signalling theory of education is similar to the signalling theory of advertising.
DIF: Easy TOP: An alternative view of education: signalling
15. It is increasingly clear that technological change, rather than international trade, has been largely responsible for an expanding wage gap between high-skill and low-skill workers.
DIF: Moderate TOP: Human capital
16. For any given level of output, unionisation leads to an increase in the value of the marginal product of labour.
DIF: Moderate TOP: unions and imperfect competition in labour markets
17. Unions are analogous to monopolies insofar as that the only way to raise prices (wages) is to lower output (employment).
DIF: Moderate TOP: unions and imperfect competition in labour markets
18. All differences in wages that are not accounted for by differences in human capital investment are likely to be a result of discrimination.
DIF: Easy TOP: Measuring labour-market discrimination
19. Given that workers differ in terms of ability and effort, firms are likely to pay people different wages even in the absence of discrimination.
DIF: Easy TOP: Human capital
20. When discrimination occurs as a result of prejudice, market solutions will not provide motive to end discrimination.
DIF: Easy TOP: Discrimination by employers
21. Profit-maximising competitive firms cannot discriminate in the hiring of workers unless consumers exercise a preference for discrimination in product markets.
DIF: Moderate TOP: Discrimination by customers and governments
22. Employers may discriminate because of asymmetric information about the quality of workers.
DIF: Moderate TOP: Can asymmetric
information explain discrimination?
23. If an employer believes that men are more likely to have a partner at home than women, they would be less risky to hire.
DIF: Moderate TOP: Case study: Can asymmetric information explain discrimination?
24. Superstars are able to earn very high incomes. Superstars arise in markets where customers want to enjoy the good supplied by the best producer, and the good can be supplied to many customers at a low cost.
DIF: Moderate TOP: The superstar phenomenon
25. Even when the labour market was efficient, wage differentials could still occur.
DIF: Moderate TOP: Measuring labour-market discrimination
26. The theory of efficiency wages explains above-equilibrium wages by assuming that workers get a rise in wage when they prove they are increasing their productivity.
DIF: Moderate TOP: The theory of efficiency wages
27. If education is a signalling device for high ability, employers will offer higher wages to educated workers.
DIF: Moderate TOP: An alternative view of education: Signalling
28. Wages never deviate from the balance of supply and demand in the market for labour.
DIF: Moderate TOP: The theory of efficiency wages
29. The ‘beauty premium’ can be explained by the fact that in some occupations, physical attractiveness of a worker may enhance the value of their marginal product.
DIF: Moderate TOP: Case study: The benefits of beauty
MULTIPLE CHOICE
1. The basic neoclassical theory of the labour market predicts that:
A. | wages are determined entirely by market supply |
B. | workers are compensated according to their contribution to the social value of society |
C. | workers earn a wage equal to the value they contribute to the economy |
D. | wages are determined entirely by firms that demand labour services |
DIF: Easy TOP: Compensating differentials
2. When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:
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 |
DIF: Easy TOP: Compensating differentials
3. The fact that workers receive different wages is likely caused by:
A. | government regulation that restricts the free movement of wages |
B. | the fact that some firms make more money than others |
C. | conditions of supply and demand in different labour markets |
D. | stronger unions in some industries |
DIF: Easy TOP: Compensating differentials
4. The compensating differential refers to:
A. | the difference in compensation (salary) that various jobs pay |
B. | the pecuniary difference between jobs |
C. | the difference in wages that arise from the non-monetary characteristics of different jobs |
D. | the fact the dangerous jobs will always pay more than non-dangerous jobs |
DIF: Moderate TOP: Compensating differentials
5. Which of the following is an example of compensating differentials affecting wages?
A. | a lawyer receiving a higher wage than a cleaner as the supply of lawyers is less than the supply of cleaners |
B. | a highly educated civil engineer receiving a higher wage than his peers as she has a higher value of marginal product of labour |
C. | a doctor foregoing $100 000 in income to volunteer in a developing country |
D. | workers who work nightshift being paid the same as workers who work during the day |
DIF: Moderate TOP: Compensating differentials
6. Given a community worker for the Red Cross gets paid less money than a professional soccer player, this means that:
A. | a soccer player is valued more by society than a community worker |
B. | labour markets are generally inefficient and inequitable |
C. | a soccer player generates more revenue in the economy than a community worker |
D. | none of the above are true |
DIF: Moderate TOP: Compensating differentials
7. Human capital is:
A. | the stock of machines, equipment, and land that is used in production of other goods |
B. | the stock of capital in the economy in the possession of humans |
C. | the ratio of labour to capital in the economy |
D. | the accumulation of investments in people |
DIF: Moderate TOP: Human capital
8. Wage compensation is likely to be a function of which of the following?
A. | the job requirements |
B. | the characteristics of workers |
C. | non-monetary attributes of the job undertaken |
D. | all of the above |
DIF: Moderate TOP: Compensating differentials
9. Research engineers at GE (General Electric) cannot publish their results nor claim credit for any discoveries they makes. Suppose GE has a change of policy and now allows their employees to publish academic articles and claim credit for their findings. This will lead to a shift in:
A. | the demand for labour curve up |
B. | the demand for labour curve down |
C. | the supply of labour curve left |
D. | the supply of labour curve right |
DIF: Easy TOP: Compensating differentials
10. When the supply of workers is scarce, one would predict that market wages would be:
A. | determined solely by factors that affect demand |
B. | determined outside the domain of the neoclassical theory |
C. | high, other things being equal |
D. | low, other things being equal |
DIF: Easy TOP: Compensating differentials
11. Human capital raises the wages of individuals because:
A. | it raises the value of the marginal product of labour |
B. | highly educated workers need to be compensated for the costs of their education |
C. | highly educated workers are more deserving than those with low education |
D. | it raises the marginal revenue of production, leading to higher prices and wages |
DIF: Easy TOP: Human capital
12. Library assistants are known to have low wages. This is likely to be partly explained by the fact that:
A. | library assistants jobs are widely considered to be difficult |
B. | library assistants jobs are perceived to be relatively easy |
C. | libraries are hazardous locations with elevated accident risks |
D. | library assistants are required to have a university degree |
DIF: Moderate TOP: Compensating differentials
13. A plumber who specialises in cleaning plugged sewer lines is typically paid a higher wage than a plumber who works on installing water systems in new residential housing. This is likely to be partly explained by the fact that:
A. | plumbing jobs involving sewer lines are likely to have an element of personal satisfaction |
B. | plumbers who work with sewer lines are more likely to work a standard shift |
C. | a plumber who works with clogged sewer lines is likely to be perceived as doing a ‘dirty’ job |
D. | plumbers who work with clogged sewer lines require years of specialised training |
DIF: Moderate TOP: Compensating differentials
14. Professional underwater divers are known to have high wages and work an average of only 20 hours a week. The high wages are partly explained by the fact that the job:
A. | does not require a university degree |
B. | is likely to be very dangerous |
C. | is likely to be very dull |
D. | is likely to be fun |
DIF: Moderate TOP: Compensating differentials
15. Sarah, a university student, is trying to consider what she should do for summer employment. Two recruiters show up at her university in search of summer workers. Recruiter A is looking for lifeguards to patrol the beach. Recruiter B is looking for workers to staff positions at a summer youth camp.
On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:
A. | the large pool of applicants for the lifeguard job will likely lead to a high wage |
B. | the small pool of applicants for the summer camp job will likely lead to a high wage |
C. | the lifeguard job is likely to be more fun than the summer camp job |
D. | all of the above are true |
DIF: Difficult TOP: Compensating differentials
16. On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:
A. | if the lifeguard job also requires a willingness to clean public restrooms, the wage offer will be lower than otherwise |
B. | if the lifeguard job has a requirement for special training or certification, this would tend to increase the wage offer |
C. | wages are unlikely to be affected by job requirements |
D. | since the lifeguard job would expose him to skin cancer, the wage is likely to be low |
DIF: Difficult TOP: Compensating differentials
17. On the basis of knowledge obtained in her economics class, Sarah is likely to conclude that:
A. | if the summer camp job doesn’t require any special skills, the wage offer is likely to be lower than otherwise |
B. | the lifeguard job is likely to be more fun than the summer camp job, so its wage is likely to be higher |
C. | the summer camp job requires some night shift work, so wages are likely to be lower |
D. | all of the above are true |
DIF: Difficult TOP: Compensating differentials
Ferris B, a university student, is trying to consider what he should do for summer employment. Two recruiters show up at his university in search of summer workers. Recruiter A is looking for workers to help a disaster relief agency distribute food aid in Africa. Recruiter B is looking for custodial help to clean motel rooms in a motel located near the entrance to a famous national park.
18. On the basis of knowledge obtained in his economics class, Ferris is likely to conclude that:
A. | if the motel job also requires an ability to do general plumbing repairs, the wage offer will be low |
B. | wages are unlikely to be affected by job requirements |
C. | if the food distribution job has a requirement for special training or certification, this would tend to increase the wage offer |
D. | since the food distribution job would expose him to the Ebola virus, the wage is likely to be low |
DIF: Difficult TOP: Compensating differentials
19. A compensating differential means that:
A. | a wage difference arises from different marginal productivities of labour |
B. | workers that do similar work should be paid the same wage |
C. | a wage difference arises from non-monetary characteristics of different jobs |
D. | all of the above |
DIF: Easy TOP: Compensating differentials
20. Doppelsöldners were sixteenth century German soldiers that received double pay for fighting in the front of their unit. The likely difference in wages was caused by:
A. | doppelsöldners having more expensive uniforms |
B. | an archaic custom with no market explanation |
C. | doppelsöldners belonged to a union and other soldiers did not |
D. | doppelsöldners having a more dangerous job than other soldiers |
DIF: Easy TOP: Compensating differentials
21. When workers who work the night shift are paid more than those who do identical work on the day shift, this is referred to as:
A. | wage inequity |
B. | inefficient markets |
C. | a compensating differential |
D. | discriminatory wage practice |
DIF: Moderate TOP: Compensating differentials
22. The statement that ‘night shift workers make a higher wage than day shift workers’ is likely to reflect:
A. | a general worker preference for day shift jobs |
B. | the fact that some people just prefer to work a night shift for non-monetary reasons |
C. | the fact that night shift jobs are generally more technically difficult |
D. | the fact that women work the night shift more than men |
DIF: Moderate TOP: Compensating differentials
23. 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:
A. | discrimination by the firm |
B. | differences in work experience |
C. | regulations in the labour market |
D. | compensating differentials |
DIF: Moderate TOP: Compensating differentials
24. Technology is an important factor in explaining the high incomes of superstars because:
A. | technology is available which can limit access to the superstars |
B. | only technologically literate superstars can earn super incomes |
C. | technology accounts for differences in incomes within all occupations |
D. | technology makes it possible for the best producer to supply every customer at low cost |
DIF: Moderate TOP: The superstar phenomenon
25. The statement, ‘coal miners are paid more than workers with similar levels of education’, is likely to reflect the fact that:
A. | coal mining is a declining industry |
B. | coal exports are rising |
C. | coal mining jobs are potentially more dangerous than jobs with comparable education requirements |
D. | all coal mines use union labour |
DIF: Moderate TOP: Compensating differentials
26. The statement that ‘public school teachers are paid less than engineers, but have similar amounts of education’, is likely to reflect market conditions such that:
A. | engineering classes at the university are universally more difficult than education classes at the university |
B. | engineers have higher intrinsic job satisfaction than public school teachers |
C. | wage discrimination is more likely in markets for public school teachers |
D. | public school teachers must receive a compensating wage differential |
DIF: Moderate TOP: Compensating differentials
27. The ownership of human capital:
A. | is not generally transferable |
B. | is easily transferable to multiple individuals |
C. | is typically embodied in related physical capital |
D. | may be subject to government restrictions on transferability |
DIF: Easy TOP: Human capital
28. An increase in the human capital of workers is:
A. | likely to decrease their value of marginal product |
B. | likely to increase their value of marginal product |
C. | not likely to change their value of marginal product |
D. | a waste of resources for most jobs |
DIF: Easy TOP: Human capital
29. The return to investment in human capital is observed:
A. | in the wage differential between workers |
B. | only when workers are assigned identical tasks |
C. | in the low wages of educated factory workers |
D. | in the high-school dropout rate in inner city urban school districts |
DIF: Moderate TOP: Human capital
30. The wage differential between educated workers and uneducated workers in developing economies is typically:
A. | unrelated to marginal productivity |
B. | larger than that which exists in developed economies |
C. | smaller than that which exists in developed economies |
D. | difficult to measure |
DIF: Easy TOP: Human capital
31. The wage difference between jobs that require education and those that don’t:
A. | is not likely to be related to productivity differences |
B. | encourages workers to bear the cost of acquiring education |
C. | is a barrier to obtaining an education |
D. | does not affect the supply of workers in the different labour markets |
DIF: Moderate TOP: Human capital
32. Up until the late 1980’s, the ratio of earnings of university graduates to the earnings of those who left after secondary school declined. However, during this period equilibrium quantity of employed university graduates also increased. What could explain this outcome?
A. | demand for university graduates fell while the number of people graduating was stable |
B. | demand for university graduates rose while the number of people graduating was stable |
C. | supply of university graduates fell while the number of people graduating was stable |
D. | both the supply and demand for university graduates rose |
DIF: Moderate TOP: Case Study: the changing value of skills
33. 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:
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 |
DIF: Moderate TOP: Human capital
34. When computers are used to replace workers on a factory production line, the wage gap:
A. | between skilled and unskilled workers is likely to fall |
B. | will rise only if the company can increase the price of its product |
C. | between skilled workers and unskilled workers is likely to increase |
D. | between skilled workers and unskilled workers will not change |
DIF: Moderate TOP: Human capital
35. Economists have proposed which of the following as contributing to the rising wage gap between skilled and unskilled workers?
A. | decreasing international trade |
B. | technological improvements in capital stocks |
C. | the increasing role of unions in setting skilled wage scales |
D. | skilled workers are doing jobs that are increasingly dangerous |
DIF: Difficult TOP: Human capital
36. Hypotheses described in the text, and that have been proposed to explain the rising wage gap between skilled and unskilled workers:
A. | may be reasonable explanations for a country whose technology and participation in world markets have remained constant over the relevant time period |
B. | may be complementary to one another |
C. | must be mutually exclusive |
D. | are, in fact, the only possible explanations for the observed wage gap |
DIF: Moderate TOP: Human capital
37. Professional cricket players have very large differences in the salaries that is best explained by:
A. | chance |
B. | the team the player is contracted to |
C. | natural ability |
D. | the number of sports cars the player owns |
DIF: Moderate TOP: Human capital
38. Business firms that pay salespeople a percentage of the sales they make are attempting to reward:
A. | comparable worth |
B. | years of experience |
C. | years of schooling |
D. | work effort |
DIF: Easy TOP: Human capital
39. Suppose John was very skilled at developing film into photos. John however, lacks the skills to process digital photos because he knows little about computers. Most amateur photographers now use digital cameras. This means it is very likely that John’s wage will fall because of:
A. | his natural ability |
B. | the poor geographic location of his employment |
C. | his poor work effort |
D. | a chance event that is making his skills obsolete |
DIF: Moderate TOP: Human capital
40. Economists who study labour markets have discovered that:
A. | only about five per cent of wage differences are related to chance |
B. | ability, effort and chance are likely to be significant contributors to wage differences |
C. | ability is not difficult to measure, but is largely insignificant in explaining wage differences |
D. | work effort is difficult to measure, but is not likely to contribute much to an explanation of wage differences |
DIF: Moderate TOP: Human capital
41. Studies that try to measure the factors that explain wage differences have shown that:
A. | influences on wage differences are found to be quite small |
B. | few factors are not explicitly measurable |
C. | measurable factors explain less than half of the variation in wages |
D. | effort and ability are not likely to contribute to large differences in wages |
DIF: Moderate TOP: Ability, effort and chance
42. Empirical analysis of wage differences have found evidence:
A. | that suggests that physical appearance-related wage differentials among males are vastly different to such differentials among females |
B. | of direct correlation between wages and attractiveness |
C. | of a minor role played by omitted variables |
D. | that the physical appearance of people in identical jobs is not likely to impact their wages |
DIF: Moderate TOP: Case study: The benefits of beauty
43. The ‘beauty premium’ can be explained by the fact that:
A. | beauty acts as an implicit signal of innate intelligence |
B. | beautiful people are likely to reflect ‘good breeding’ |
C. | marginal productivity in all occupations has a physical dimension |
D. | in some occupations, physical attractiveness of a worker may enhance the value of their marginal product |
DIF: Easy TOP: Case study: The benefits of beauty
44. The alternative to human capital theory that explains why people invest in education argues that:
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’ |
DIF: Moderate TOP: An alternative view of education: Signalling
45. Even when university education in Australia was free, not everyone got a degree. Which of the following is one possible reason for why some people would get degrees while others would not?
A. | although free in a monetary sense getting a degree takes time and effort, the cost of which will be lower for high-skilled people than low-skilled people |
B. | the human capital effects of university have been shown to be small, corresponding to only small increases in wages |
C. | the benefits of education are likely to be higher for low-ability people than for high-ability, and so high-ability would not find it profitable to attend university |
D. | none of the above |
DIF: Moderate TOP: An alternative view of education: Signalling
46. Under the ‘signalling view’ of education, obtaining a university degree communicates valuable information to employers because:
A. | it is easier for high-ability people to get a degree than low ability people, so more high-ability people get degrees |
B. | the high cost of education signals the employee’s desire and commitment to an industry |
C. | the high level of work needed to obtain a university education is a signal of effort |
D. | the skills and knowledge leant at university increases an employee’s marginal product |
DIF: Moderate TOP: An alternative view of education: Signalling
47. Suppose an individual who left school at 16 earns more than a surgeon with 10 years of tertiary education. Such an outcome suggests:
A. | that there is some kind of market failure |
B. | human capital does not have high returns |
C. | that chance and natural ability can be just as important as human capital in determining wages |
D. | the early school lever must have a high level of job satisfaction |
DIF: Easy TOP: Ability, effort and chance
48. Evidence suggests that the cause of increased wages from obtaining a university education:
A. | is mostly due to increases in human capital |
B. | is mostly due to the signalling value of a degree |
C. | is mostly due to scarcity effects |
D. | is inconclusive: it is an open question as to the relative size of the human capital and signalling effects |
DIF: Moderate TOP: An alternative view of education: Signalling
49. Empirical evidence based on analysis of education attainment suggests that:
A. | innate ability is the most important determinant of wages |
B. | students in states with compulsory schooling laws did not have higher wages than those in other states |
C. | almost all wages can be explained by factors linked to the signalling theory |
D. | education does increase the marginal productivity of workers |
DIF: Moderate TOP: Human capital
50. If empirical tests of the human capital theory find conclusive evidence that education enhances productivity, then optimal public policy would suggest that:
A. | everyone should be required to finish high school |
B. | compulsory schooling laws always increase social wellbeing |
C. | the benefits of increased productivity need to be weighted against the opportunity cost of education |
D. | a university education should be required of all members of society |
DIF: Moderate TOP: Human capital
51. The high incomes for superstars in the movie market can be attributed to the fact that:
A. | there are not many good substitutes for the product offered |
B. | people who become superstars have the best publicists |
C. | superstars are very lucky individuals |
D. | there are a lot less good movies being made at the moment |
DIF: Easy TOP: The superstar phenomenon
52. Evidence of differences in average wages of women compared to men:
A. | provides conclusive evidence of broad patterns of discrimination on the basis of gender |
B. | are solely indicative of differences in productivity between genders |
C. | does not provide conclusive evidence of discrimination |
D. | is seldom used to provide evidence of discriminatory bias |
DIF: Easy TOP: Discrimination by employers
53. Evidence of differences in average wages of Aboriginal workers compared to white workers:
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 |
DIF: Moderate TOP: Discrimination by employers
54. Evidence of discrimination in labour markets:
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 |
DIF: Easy TOP: Discrimination by employers
55. Given that there are statistical differences in human capital across both age groups and gender, then this is likely to:
A. | explain all of the differences in average wage rates across age classifications |
B. | explain some of the differences in average wage rates across gender classifications |
C. | be unrelated to wage rate differences across gender classifications, since both men and women are required to complete requirements for a high-school certificate |
D. | explain none of the differences in average wage rates across gender classifications |
DIF: Easy TOP: Measuring labour-market discrimination
56. Economists generally agree that:
A. | differences in average wages do not by themselves provide conclusive evidence about the magnitude of discrimination effects in labour markets |
B. | discrimination is exclusively an economic, rather than political, phenomenon |
C. | human capital theory provides the best explanation of discriminatory practices |
D. | much of the wage differential observed in the economy is due to discrimination |
DIF: Easy TOP: Discrimination by employers
57. The fact that women are more likely to interrupt their careers to raise children reflects:
A. | a potential market-based reason why average wages for men exceed those for women |
B. | further evidence that labour markets discriminate against women |
C. | evidence that society undervalues the role of women in the market place |
D. | evidence that markets are inefficient at allocating labour resources |
DIF: Moderate TOP: Discrimination by employers
58. If a firm is in a competitive product market but practices discrimination when hiring workers, then it:
A. | will survive, if it increases production and captures a larger market share |
B. | will eventually earn zero economic profits |
C. | will be less profitable than firms that don’t discriminate and may not survive |
D. | will survive as long as it is willing to have a smaller market share |
DIF: Moderate TOP: Discrimination by employers
59. Without government intervention in competitive markets:
A. | evidence of discrimination in market economies is generally quite prevalent |
B. | discrimination is motivated by profit-maximising entrepreneurs |
C. | the inequity of discrimination cannot be rectified |
D. | evidence of employer discrimination is rare |
DIF: Easy TOP: Discrimination by employers
60. Evidence suggests that business owners are generally:
A. | more interested in making a profit than in discriminating against a particular group |
B. | more interested in discrimination than in making a profit |
C. | unable to determine the link between discrimination and profitability |
D. | only interested in profits when discrimination is illegal |
DIF: Easy TOP: Discrimination by employers
61. Even if markets are competitive, discriminatory hiring practices can persist because of:
A. | payroll taxes |
B. | the lower costs of hiring of workers discriminated against |
C. | customer preferences |
D. | minimum wages that are set below the market equilibrium wage |
DIF: Moderate TOP: Discrimination by customers and governments
62. According to the economist Roback, the early 20th century:
A. | segregation of black and white customers in streetcars was supported by the railroad companies |
B. | segregation of black and white customers in streetcars was opposed by the government |
C. | segregation of black and white customers in streetcars was made mandatory by the government with the support of railroad companies |
D. | segregation of black and white customers in streetcars was made mandatory by the government against the wishes of railroad companies |
DIF: Easy TOP: Discrimination by customers and governments
63. 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:
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 |
DIF: Moderate TOP: Measuring labour-market discrimination
64. A likely consequence of implementing comparable worth proposals is that it would lead to:
A. | an increase in the wage of male-dominated occupations |
B. | an increase in the average gender wage gap |
C. | an increase in female unemployment rates |
D. | an increase in the female participation rate in previously male-dominated occupations |
DIF: Difficult TOP: Measuring labour-market discrimination
65. A comparable worth law is likely to:
A. | have an adverse affect on the employment of women in some occupations that are considered underpaid |
B. | enhance the efficiency of markets in allocating scarce labour resources |
C. | lower the wages in occupations that have been traditionally dominated by women |
D. | increase employment of women in traditional occupations dominated by male workers |
DIF: Difficult TOP: Measuring labour-market discrimination
66. What is most likely to cause a decrease in demand for unskilled labour in Australia?
A. | an increase in productivity gains among the unskilled labourers |
B. | an increase in demand for goods produced by unskilled labour |
C. | an increase in immigration |
D. | an increase in international trade with countries where unskilled labour is more plentiful |
DIF: Moderate TOP: Compensating differentials
67. In the signalling theory of education, which of the following are considered to be true?
A. | schooling makes employees less productive |
B. | schooling does not affect a worker’s productivity |
C. | workers signal to the employer that they are valuable employees because they were willing to spend time to get an education |
D. | women are less likely to do male-dominated majors like engineering |
DIF: Moderate TOP: An alternative view of education: Signalling
68. Which of the following theories suggests that education makes workers more productive and therefore able to earn a higher wage?
A. | human capital theory |
B. | signalling theory |
C. | the theory of compensating differentials |
D. | cost allocation theory |
DIF: Moderate TOP: Human capital
69. Which of the following theories suggests that education is correlated with natural ability?
A. | human capital theory |
B. | signalling theory |
C. | the theory of compensating differential |
D. | cost allocation theory |
DIF: Moderate TOP: An alternative view of education: Signalling
70. Which of these theories would support the idea that increasing educational levels for all workers would raise all workers’ productivity and thereby their wage?
A. | human capital theory |
B. | signalling theory |
C. | the theory of compensating differentials |
D. | the efficient market hypothesis |
DIF: Moderate TOP: Human capital
71. Which theory would support the idea that education does not enhance productivity, and raising workers’ educational levels would not affect wages?
A. | human capital theory |
B. | the efficient market hypothesis |
C. | the theory of compensating differentials |
D. | signalling theory |
DIF: Moderate TOP: An alternative view of education: Signalling
72. Which of the following theories would suggest that attending school does not improve productivity, but that high-ability people are more likely to stay in school?
A. | human capital theory |
B. | signalling theory |
C. | the theory of compensating differential |
D. | the efficient market hypothesis |
DIF: Moderate TOP: An alternative view of education: Signalling
73. One of the reasons that movie stars have extraordinarily high incomes is that:
A. | movie stars do their own stunts |
B. | technological advances in the movie industry have ceased |
C. | even without makeup the average movie star is extraordinarily attractive |
D. | almost everyone can enjoy movies at a low cost |
DIF: Moderate TOP: The superstar phenomenon
74. Why is a plumber never likely to be as rich as a movie star?
A. | compensating differentials create a higher wage in the movie business |
B. | a plumber can provide his services to only a limited number of customers |
C. | there haven’t been any decent technological advances in the plumbing industry |
D. | productivity levels are low in the plumbing industry due to low worker morale |
DIF: Moderate TOP: The superstar phenomenon
75. Restricting some jobs to only union members is likely to:
A. | reduce total employment and raise wages earned by insiders |
B. | reduce total employment and decrease wages earned by insiders |
C. | increase total employment and raise wages earned by insiders |
D. | increase total employment and decrease wages earned by insiders |
DIF: Moderate TOP: Unions and imperfect competition in labour markets
76. Most workers in the economy earn a wage that is:
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 |
DIF: Easy TOP: Compensating differentials
77. What is the definition of a union?
A. | a group of employers whose goal is to keep wages above equilibrium levels |
B. | a group of employers whose goal is to keep wages below equilibrium levels |
C. | a group of employees whose goal is to keep wages above equilibrium levels |
D. | a group of employees whose goal is to keep wages below equilibrium levels |
DIF: Easy TOP: Unions and imperfect competition in labour markets
78. A union’s major source of power is its:
A. | charismatic and experienced leader |
B. | ability to withhold labour |
C. | ability to bargain for shorter working weeks |
D. | ability to shift the demand curve for labour to the right |
DIF: Easy TOP: Unions as monopolists
79. How does the theory of efficiency wages explain above-equilibrium wages?
A. | employers are forced to pay higher wages in efficient markets |
B. | workers get a rise in wage when they prove they are increasing their productivity |
C. | employers give their workers a higher wage in the hope that it will lead to increased productivity |
D. | workers demand higher wages to compensate for poor fringe benefits |
DIF: Easy TOP: The theory of efficiency wages
80. If an employer believes in the theory of efficiency wages, he will raise wages in effort to do which of the following?
A. | increase worker effort and increase worker turnover |
B. | increase worker effort and decrease worker turnover |
C. | decrease worker effort and increase worker turnover |
D. | decrease worker effort and decrease worker turnover |
DIF: Moderate TOP: The theory of efficiency wages
81. Which theory explains the fact that some firms may choose to pay their employees more than they would normally earn?
A. | human capital theory |
B. | signalling theory |
C. | the theory of efficiency wages |
D. | the efficient market hypothesis |
DIF: Easy TOP: The theory of efficiency wages
82. Efficiency wages that create above-equilibrium wages will most likely result in which of the following:
A. | a shortage of labour and decreased unemployment of labour |
B. | a shortage of labour and increased unemployment of labour |
C. | a surplus of labour and decreased unemployment of labour |
D. | a surplus of labour and increased unemployment of labour |
DIF: Difficult TOP: The theory of efficiency wages
83. Suppose the apple pickers of Australia successfully form a union with 100% membership and negotiate a wage rise of 20 per cent. If the market demand for apple pickers is downward sloping this will result in:
A. | greater employment in the apple picking industry |
B. | no change in employment in the apple picking industry |
C. | a shift in the supply curve of apple pickers |
D. | the price of apples to fall |
DIF: Moderate TOP: Unions and imperfect competition in labour markets
84. The wage differences we observe in the economy are, to a large extent, attributable to:
A. | inefficient markets |
B. | equivalent demand for labour across different jobs held by different groups of people |
C. | the determinants of equilibrium wage |
D. | constant productivities across different employment groups |
DIF: Moderate TOP: Compensating differentials
In the small town of Hamilton, Tasmania, there is a local hardware store called Eddy’s Hardware. Only two types of workers apply for jobs at Eddy’s Hardware, cowboys and farmboys. Local politicians have received numerous complaints that Eddy’s Hardware is practicing wage discrimination against cowboys. Eddy’s Hardware denies the complaint and says they are only trying to maximise profit. There is also a second hardware store in town, named Frank’s Hardware, which, unlike Eddy’s Hardware, is not facing discriminatory complaints.
85. Which of the following statements would weaken the discrimination complaint against Eddy’s Hardware?
A. | cowboys are more productive than farm boys |
B. | cowboys are generally less educated in the field of hardware |
C. | cowboys are hard workers |
D. | all of the above |
DIF: Difficult TOP: Discrimination by employers
86. In which industries do you think a union negotiated wage rise will have the largest impact on employment?
A. | industries where the marginal product of labour is increasing |
B. | those industries which have a near inelastic demand for labour |
C. | those industries in which the equilibrium wage is already very high |
D. | industries in which there are many substitutes for labour |
DIF: Moderate TOP: unions and imperfect competition in labour markets
87. Economists are skeptical about the idea that discrimination is employer-driven for which of the following reasons?
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 |
DIF: Difficult TOP: Discrimination by employers
88. The fact that wage differentials continue to exist across different groups of workers has led economists to believe that:
A. | discrimination is in fact a very large economic problem |
B. | firms apparently are not profit maximisers |
C. | differences in human capital and job characteristics must be important in explaining the differences in wages |
D. | the market has failed to properly allocate wages to different workers |
DIF: Moderate TOP: Discrimination by employers
89. An increase in safety standards does not directly raise the wage of employees, however a neoclassical analysis of labour markets suggests it will decrease total employment. What mechanism drives this result?
A. | an increase in safety standards leads to more people wishing to enter the labour force |
B. | higher safety costs decrease the value of the marginal product of labour, leading to a downward shift in demand |
C. | higher safety costs decrease the value of the marginal product of labour, leading to an upward shift in demand |
D. | the labour supply curve shifts inwards in response to safer working conditions |
DIF: Moderate TOP: unions and imperfect competition in labour markets
90. Business owners who care only about making money are:
A. | likely to discriminate against certain groups of workers |
B. | likely to not discriminate against certain groups of workers |
C. | likely to be replaced by discriminating businesses |
D. | very interested in the colour of their employees’ skin |
DIF: Moderate TOP: Discrimination by employers
The competitive labour market for barbers is differentiated into two groups, those who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the non-bald market. Further assume that the market for haircuts is competitive.
91. Refer to the information provided. If consumers do not discriminate between bald barbers and barbers with hair, then:
A. | all barbershops will earn a normal economic profit |
B. | the difference in wages is able to be maintained since a haircut is not a homogeneous good |
C. | barbershops that hire bald barbers will be more profitable than those that don’t |
D. | barbershops that hire barbers with hair will be more profitable than those that don’t |
DIF: Difficult TOP: Discrimination by employers
92. Refer to the information provided. If consumers do not discriminate between bald barbers and barbers with hair, then:
A. | wages in the market for barbers can never be in equilibrium |
B. | competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to be identical |
C. | the equilibrium wage in the ‘bald’ market will eventually fall |
D. | the equilibrium wage in the ‘non-bald’ market will eventually rise |
DIF: Difficult TOP: Discrimination by employers
93. Refer to the information provided. Competition in the market for haircuts is consistent with which of the following statements?
A. | firms hiring non-bald barbers will have a cost advantage, leading to an increase in the demand for non-bald barbers |
B. | firms that hire only bald barbers will eventually all go out of business |
C. | all firms must eventually end up with some bald and some non-bald barbers |
D. | firms hiring bald barbers will enter the market, increasing the demand for bald barbers |
DIF: Difficult TOP: Discrimination by employers
94. Refer to the information provided. If some consumers in the market for a haircut have a strong preference for having their hair cut by a barber that is not going bald, then:
A. | a competitive market equilibrium is not consistent with the wage difference between bald and non-bald barbers |
B. | the difference in wages will eventually disappear, since a haircut is a homogeneous good |
C. | barbershops that hire barbers with hair will always be much more profitable |
D. | barbershops that hire barbers with hair will be able to charge a higher price for a haircut to those consumers that have a strong preference for non-bald barbers |
DIF: Difficult TOP: Discrimination by employers
95. The declining gender wage gap is best explained by which of the following?
A. | women gaining more continuous work experience and delaying marriage |
B. | women gaining more continuous work experience and have more favourable working conditions |
C. | women gaining less continuous work experience and delaying marriage |
D. | women gaining less continuous work experience and have more favourable working conditions |
DIF: Moderate TOP: Case study: Can asymmetric information explain discrimination?
96. Which of the following facts are likely to have influenced the declining gender wage gap?
A. | fertility rates have risen and there is an increasing tendency for mothers with young children to work |
B. | fertility rates have risen and there is a decreasing tendency for mothers with young children to work |
C. | fertility rates have fallen and there is a decreasing tendency for mothers with young children to work |
D. | fertility rates have fallen and there is an increasing tendency for mothers with young children to work |
DIF: Moderate TOP: Case study: Can asymmetric information explain discrimination?
97. The process through which unions and firms agree to the terms of employment is known as:
A. | union market power |
B. | imperfect negotiation |
C. | collective bargaining |
D. | union extortion |
DIF: Easy TOP: unions and imperfect competition in labour markets
98. Trade unionisation rates in Australia have been:
A. | trending up |
B. | trending down |
C. | remained roughly constant |
D. | have been fluctuating |
DIF: Easy TOP: unions and imperfect competition in labour markets
99. Women tend to expect to work more years of their life than they used to. This new development in work expectations has led to which of the following?
A. | increased female enrollment in higher education and increased relative earnings of female workers |
B. | increased female enrollment in higher education and decreased relative earnings of female workers |
C. | decreased female enrollment in higher education and increased relative earnings of female workers |
D. | decreased female enrollment in higher education and decreased relative earnings of female workers |
DIF: Difficult TOP: Measuring labour-market discrimination
100. Which product market structure will unions most effectively be able to negotiate higher wages?
A. | competitive |
B. | monopolistically competitive |
C. | oligopoly |
D. | monopoly |
DIF: Moderate TOP: unions as monopolists
101. One of the problems in calculating the true amount of discrimination that takes place in the market for labour is:
A. | the difficulty in measuring productivity differences between workers |
B. | the inability to calculate wage differentials |
C. | the inability to see changes in the wage differentials over a period of time |
D. | inadequate reporting of discrimination |
DIF: Moderate TOP: Measuring labour-market discrimination
102. When a worker is deciding whether to take a job or not:
A. | the wage is believed by economists to be the only determining factor |
B. | the worker may consider the inherent danger involved in the given job |
C. | the worker may consider whether the job is exciting |
D. | both B and C are correct |
DIF: Easy TOP: Compensating differentials
103. If every customer wants to enjoy the good of one producer, and the producer can supply the good to every customer at a low cost, then this is known as:
A. | compensating differentials |
B. | the superstar phenomenon |
C. | natural monopoly |
D. | union wage inflation |
DIF: Easy TOP: The superstar phenomenon
104. Differences in wages between highly educated workers and less educated workers are most likely to be considered:
A. | unfair by all economists |
B. | completely fair by everyone |
C. | a compensating differential for the cost of becoming educated |
D. | a signal that the market is indifferent to a worker’s level of human capital |
DIF: Easy TOP: Compensating differentials
105. Which of the following statements are true of wages, educational attainment and gender?
A. | male workers are compensated for attending university, while female workers generally are not |
B. | female workers are compensated for attending university, while male workers generally are not |
C. | neither gender receives a higher wage for attending university |
D. | both genders receive a higher wage for attending university |
DIF: Moderate TOP: Human capital
106. A market where there is a single buyer for a product is called a:
A. | monopoly |
B. | buyer’s monopoly |
C. | monopsony |
D. | bilateral monopoly |
DIF: Moderate TOP: Bilateral monopoly
107. Students who are required to finish more schooling have been found to:
A. | be happier with their career choices |
B. | be more likely to feel the effects of minimum wage increases |
C. | suffer from unemployment volatility |
D. | earn a higher wage |
DIF: Easy TOP: Human capital
108. Economists usually agree that if a study shows conclusive evidence that education is directly tied to increases in productivity:
A. | all students should be compelled to finish high school |
B. | all students should be compelled to obtain a university degree |
C. | nothing should be done |
D. | the costs of education should also be considered |
DIF: Moderate TOP: Human capital
109. Which of the following statements is false?
A. | wages never deviate from the balance of supply and demand in the market for labour |
B. | some wages fall above the equilibrium wage |
C. | workers sometimes form labour unions to push their wages up |
D. | the federal government mandates that employers to pay their workers at least as much as the minimum wage |
DIF: Moderate TOP: Case study: Can asymmetric information explain discrimination?
Billy works for the local piano-moving company part-time after school. Billy has worked on the job for a couple of years but still hasn’t received a wage rise, even though newer employees have received raises. Billy has threatened his employer with a lawsuit if he doesn’t get a raise in the next few weeks. Billy believes he is being severely discriminated against.
Use this information to answer the following question(s).
110. Refer to the information provided. Which of the following statements would weaken Billy’s case against his employer?
A. | the other employees have high-school certificates and Billy does not |
B. | Billy only works part-time and as a result has fewer hours of experience, even though he has been with the business longer |
C. | Billy complains of lower back problems and as a result frequently gets the easy job of holding the doors open while the movers carry the piano into the customer’s house |
D. | all of the above |
DIF: Difficult TOP: Discrimination by employers
111. Refer to the information provided. Why might an economist be sceptical of Billy’s discrimination complaint?
A. | in a competitive market, employers pay employees based on their value to the firm |
B. | discrimination leads to profit maximisation |
C. | only cost minimisers practice discrimination |
D. | through anti-trust laws, discriminating firms can be penalised with large fees |
DIF: Difficult TOP: Discrimination by employers
112. Refer to the information provided. In a competitive market for piano movers, why might Billy’s wage differential persist?
A. | Billy works harder than the other employees |
B. | Billy joins a labour union |
C. | Billy’s amiable personality allows him to work well with his co-workers |
D. | customers do not like Billy because he is overweight |
DIF: Difficult TOP: Discrimination by employers
113. Economists who are critical of the notion of comparable worth are likely to argue that:
A. | the gender gap in wages is largely associated with discrimination in the labour market |
B. | discrimination engendered by cultural bias is best solved by government intervention |
C. | librarians should not be paid the same wage as an engineer |
D. | the gender gap in wages is reflective of a compensating differential based on allocations in competitive labour markets |
DIF: Difficult TOP: Discrimination by employers
SHORT ANSWER
1. In a study done by Daniel Hamermesh and Jeff Biddle, physically attractive individuals were found to command a ‘beauty premium’ in the labour market. Based on your experience with university lecturers, do you think there is likely to be a beauty premium for lecturers? Explain your answer with appropriate examples.
DIF: Difficult TOP: Case study: The benefits of beauty
2. Doppelsöldners were sixteenth century German soldiers (landsknechts) that received double pay for volunteering to fight in the front of their unit. This typically meant they were the first to engage the enemy. Assuming that their training and equipment was identical to other landsknechts, why were their wages so much higher?
DIF: Moderate TOP: Compensating differentials
3. Explain why miners in Western Australia are the modern versions of Doppelsöldners in Australia today?
DIF: Moderate TOP: Compensating differentials
4. ‘The market for school teachers is clearly inefficient; if they were paid the value of marginal product, wages would be much higher’. Evaluate this statement.
DIF: Difficult TOP: Case study: Can asymmetric information explain discrimination?
5. Why can Roger Federer command a high sponsorship bonus?
DIF: Difficult TOP: The superstar phenomenon
6. What are efficiency wages? Explain how they may make a firm more profitable.
DIF: Moderate TOP: The theory of efficiency wages
7. List the productivity factors that may explain the difference in pay between men and women in similar occupations. Do any of these factors arise as a result of cultural or social traditions? If so, describe how changes in social relationships affect the pay gap over time.
DIF: Moderate TOP: Measuring labour-market discrimination
8. Explain the role of compensating differentials in explaining the difference between the average wages of men and women.
DIF: Moderate TOP: Measuring labour-market discrimination
9. Explain the role consumers play in perpetuating discrimination in labour markets.
DIF: Moderate TOP: Discrimination by customers and governments
10. A recent study of the determinants of wages for clerical staff at a university found that years of schooling, years of experience, age and job characteristics only explained about one half of the difference in wages. Describe other factors that may be important in explaining wage differences for clerical staff. In your answer, explain how you would measure these factors for use in empirical analysis.
DIF: Difficult TOP: Compensating differentials
11. Suppose the minimum time taken to get a university degree is increased from three years to six years. What effect is this likely to have on the marginal product of labour? What effect will this have on the signalling value of a degree? Will all employers benefit from the change in signalling value?
DIF: Difficult TOP: An alternative view of education: Signalling