Earnings and Discrimination 4763
83. 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
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.
Scenario 19-2
Travis, 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 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.
84. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents.
On the basis of knowledge obtained in his economics class, Travis concludes that
a. if the job in Africa has a lot of job satisfaction, the wage will be higher.
b. if the job in Africa has a lot of job satisfaction, the wage will be lower.
c. if the job cleaning motel rooms is miserable work, the wage will be lower.
d. if the job cleaning motel rooms is not miserable work, the wage will be higher.
4764 Earnings and Discrimination
85. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents.
On the basis of knowledge obtained in his economics class, Travis concludes that
a. if the motel job also requires an ability to do general plumbing repairs, the wage offer will be
higher than otherwise.
b. if the food distribution job has a requirement for special training or certification, the wage offer
will be lower than otherwise.
c. if the food distribution job exposes him to the Ebola virus, the wage will be lower.
d. if the motel job involves substantial amounts of driving for supplies, the wage offer will be
lower than otherwise.
86. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents.
On the basis of knowledge obtained in his economics class, Travis concludes that
a. if the motel job requires some night shift work, wages will be lower than otherwise.
b. the job that is more fun will have a higher wage.
c. if the motel job doesn’t require any special skills, the wage offer will be lower than otherwise.
d. All of the above are correct.
Earnings and Discrimination 4765
87. Jill is the best eye surgeon in town, and she earns $350,000 a year. Susan is an average eye
surgeon in town, and she earns $100,000 a year. Jill’s skills as a surgeon
a. are valued more by the market relative to Susan‘s and that explains why her income is higher
than Susan’s.
b. are valued less by the market relative to Susan‘s and that explains why her income is higher
than Susan‘s.
c. are valued less by the market relative to Susan’s and that explains why her income is lower
than Susan‘s.
d. are more expensive because she receives a compensating differential.
88. 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
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.
4766 Earnings and Discrimination
89. A recent law school graduate is considering two offers to practice law, one in New York and one
in Illinois. The New York bar exam is very difficult to pass compared with Illinois’s exam.
Assuming all other things equal, the attorney would expect
a. to be unable to predict the wage difference between Illinois and New York.
b. to make a lower wage in New York.
c. to make a lower wage in Illinois.
d. wages in Illinois and New York to be identical.
90. Nancy and Sheila are both loan officers who started working for their current employer during the
same year, graduated from the same university with bachelors’ degrees in economics, and
achieved similar performance reviews. Nancy earned a master’s degree last year. If Nancy earns
a higher annual salary than Sheila because she has more formal education, the employer is
a. basing pay on experience.
b. paying efficiency wages.
c. practicing discrimination.
d. rewarding increases in human capital.
Earnings and Discrimination 4767
91. Nancy and Sheila are both loan officers who graduated from the same university with bachelors’
degrees in economics, and achieved similar performance reviews. Nancy started working one
year before Sheila. If Nancy earns a higher annual salary than Sheila because she has more
experience, the employer is
a. rewarding increases in human capital.
b. paying efficiency wages.
c. practicing discrimination.
d. paying a compensating differential.
92. Why do major-league baseball players get paid more than minor-league players?
a. Major-league players are better athletes.
b. The higher wage reflects a compensating differential.
c. Playing in the major leagues in more pleasant then playing in the minor leagues.
d. The higher wage is often due to educational discrepancies.
4768 Earnings and Discrimination
93. In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the
typical high school graduate without additional education has
a. risen as the demand for skilled labor has increased relative to the demand for unskilled labor.
b. risen as the demand for skilled labor has decreased relative to the demand for unskilled labor.
c. fallen as the demand for skilled labor has increased relative to the demand for unskilled labor.
d. fallen as the demand for skilled labor has decreased relative to the demand for unskilled labor.
94. Between 1975 and 2011, the wage gap between men with a high school education and men with a
college education increased. In particular, in 2011 men with a college degree earned about
a. 10% more than men with a high school education.
b. 25% more than men with a high school education.
c. 75% more than men with a high school education.
d. 90% more than men with a high school education.
Earnings and Discrimination 4769
95. 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
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.
Table 19-1
1975
2011
Men
High school, no college
$48,720
$46,038
College graduates
$69,146
$80,508
Percent extra for college grads
+42%
+75%
Women
High school, no college
$28,006
$32,249
College graduates
$37,804
$58,229
Percent extra for college grads
+35%
+81%
Source: US Census Bureau and Mankiw’s calculations
4770 Earnings and Discrimination
96. Refer to Table 19-1. From 1975 to 2011, the salary gap among women who graduate from
college compared to those who complete only high school
a. increased by 35% while the salary gap among men increased by 42%.
b. more than doubled while the salary gap among men rose significantly but less than doubled.
c. increased, but the salary gap among men decreased.
d. decreased, but the salary gap among men increased.
97. Refer to Table 19-1. Economists suspect that the increase in the earnings gap between skilled
and unskilled workers is likely due to
a. an increase in the demand for skilled labor relative to the demand for unskilled labor.
b. an increase in international trade.
c. improvements in technology.
d. All of the above are correct.
Earnings and Discrimination 4771
98. Which of the following statements is true of wages, educational attainment, and gender?
a. Male workers are compensated for attending college, while female workers generally are not.
b. Female workers are compensated for attending college, while male workers generally are not.
c. Both genders receive a higher wage for attending college.
d. Neither gender receives a higher wage for attending college.
99. Over the past several years, the earnings gap between high-skilled and low–skilled workers has
a. increased.
b. decreased.
c. remained constant.
d. first increased by a small percent, then decreased by a large percent.
4772 Earnings and Discrimination
100. The wage gap between skilled and unskilled worker has
a. risen; some economists argue that this is partly due to increased international trade.
b. risen; some economists argue that this is partly due to decreased international trade.
c. fallen; some economists argue that this is partly due to increased international trade.
d. fallen; some economists argue that this is partly due to decreased international trade.
101. The wage gap between skilled and unskilled worker has
a. risen; economists argue that this may be due in part to technological progress.
b. risen; economists argue that none of the rise is due to technological progress.
c. fallen; economists argue that this may be due in part to technological progress.
d. fallen; economists argue that none of the fall is due to technological progress.
Earnings and Discrimination 4773
102. Some economists hypothesize that international trade has altered the relative demand for skilled
and unskilled labor, changing the gap in earnings between these two groups. Which of the
following statements best describes this hypothesis?
a. Unskilled labor is plentiful and cheap in the US, so the US tends to export goods produced
with unskilled labor and import goods produced with skilled labor.
b. Unskilled labor is plentiful and cheap in many foreign countries, so the US tends to import
goods produced with unskilled labor and export goods produced with skilled labor.
c. Computers raise the demand for skilled workers and reduce the demand for the unskilled
workers whose jobs are replaced by the computers.
d. Greater demand for skilled labor has led to higher wages for those workers and greater
demand for imported products.
103. If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United
States expands its trade with these foreign countries, the domestic demand for
a. both skilled and unskilled labor will rise proportionately.
b. skilled labor will fall and the demand for unskilled labor will rise.
c. skilled labor will rise and the demand for unskilled labor will fall.
d. both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.
4774 Earnings and Discrimination
104. In recent years, the amount of international trade in which the United States engages has
a. increased, raising domestic demand for unskilled labor.
b. increased, reducing domestic demand for unskilled labor.
c. decreased, raising domestic demand for unskilled labor.
d. decreased, reducing domestic demand for unskilled labor.
105. In recent years, the amount of international trade in which the United States engages has
increased. Which of the following accurately describes the effect(s) on labor demanded by firms
in the United States?
a. The demand for both skilled and unskilled labor has increased.
b. The demand for both skilled and unskilled labor has decreased.
c. The demand for skilled labor relative to unskilled labor has risen.
d. The demand for unskilled labor relative to skilled labor has risen.
Earnings and Discrimination 4775
106. In the United States, the earnings gap between workers with college degrees and workers with
high school degrees
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.
107. Over the last several years, the earnings gap between workers with college degrees and workers
with high school degrees has
a. remained roughly constant for both men and women.
b. widened for both men and women.
c. widened for men and narrowed for women.
d. narrowed for men and widened for women.
4776 Earnings and Discrimination
108. Economists who attempt to explain the increasing earnings gap between skilled and unskilled
workers offer two main hypotheses:
a. one hypothesis emphasizes education, and the other emphasizes compensating differentials.
b. one hypothesis emphasizes education, and the other international trade.
c. one hypothesis emphasizes international trade, and the other emphasizes technology.
d. one hypothesis emphasizes technology, and the other emphasizes compensating differentials.
109. Economists who attempt to explain the increasing earnings gap between skilled and unskilled
workers in the United States offer two main hypotheses. Both hypotheses
a. suggest that, over time, the demand for unskilled labor has risen relative to the demand for
skilled labor.
b. suggest that, over time, the demand for skilled labor has risen relative to the demand for
unskilled labor.
c. emphasize the shrinking importance of international trade in recent years.
d. emphasize the growing importance of women and teenagers in the workforce in recent years.
Earnings and Discrimination 4777
110. Which of the following would tend to lessen the wage gap between a country’s skilled and
unskilled workers?
a. technology increases the productivity of unskilled workers more than that of skilled workers
b. the country increases trade with countries that have a higher proportion of skilled workers
c. both A and B
d. neither A nor B
111. The statement “the rich get richer and the poor get poorer” is evident in the fact that
a. the earnings gap between high-skill jobs and low-skill jobs has increased over the last several
years.
b. developing countries do not pay workers the value of their marginal product.
c. developed economies export high–skill jobs to developing countries.
d. All of the above are correct.
4778 Earnings and Discrimination
112. Which of the following scenarios would serve to decrease the demand for unskilled labor in the
U.S.?
a. increased productivity gains among unskilled laborers
b. increased demand for goods produced by unskilled laborers
c. increased international trade with countries where unskilled labor is more plentiful
d. increased supply of migrant workers
113. Increases in international trade and technological change have been offered as explanations for
the
a. increase in demand for both skilled and unskilled workers in the United States.
b. increase in demand for skilled workers and decrease in demand for unskilled workers in the
United States.
c. decrease in demand for skilled workers and increase in demand for skilled workers in the
United States.
d. decrease in demand for both skilled and unskilled workers.
Earnings and Discrimination 4779
114. When robots are used to replace workers on a factory production line, the wage gap between
skilled and unskilled workers
a. will increase only if the company can increase the price of its product.
b. is likely to increase.
c. is likely to decrease.
d. will not change.
115. In order to explain the changing gap in earnings between skilled and unskilled workers in recent
years, economists have proposed two hypotheses. One hypothesis emphasizes
a. compensating differentials.
b. the increased recognition that a larger stock of human capital usually leads to higher earnings.
c. the decreasing importance of labor unions.
d. the increasing importance of international trade.
4780 Earnings and Discrimination
116. In order to explain the changing gap in earnings between skilled and unskilled workers in recent
years, economists have proposed two hypotheses. One hypothesis emphasizes
a. compensating differentials.
b. the increased recognition that a larger stock of human capital usually leads to higher earnings.
c. technological progress.
d. the decreasing importance of international trade.
117. If, as some economists believe, changes in technology over recent decades have brought about
changes in labor markets, then those changes likely have resulted in
a. reduced emphasis on compensating differentials as an explanation for wage differences.
b. a reduced emphasis on human-capital differences among workers as an explanation for wage
differences.
c. a narrowing of the earnings gap between high-skilled workers and low–skilled workers.
d. a widening of the earnings gap between high-skilled workers and low-skilled workers.
Earnings and Discrimination 4781
118. Which of the following does not describe the hypothesis that changes in technology have altered
the relative demand for skilled and unskilled labor?
a. Firms rely more on computer databases than on paper filing systems so there is an increased
demand for high-skilled computer programmers.
b. Consumers can accomplish many simple banking tasks on an automated teller machine
(ATM) rather than speaking to a bank teller so there is a decreased demand for low– skilled
bank tellers.
c. Transponders in peoples’ vehicles can be used to automatically deduct tolls from debit
accounts, reducing the
need for low–skilled toll collectors.
d. Improvements in technology have made tax preparation software easy for an average citizen
to use, reducing the need for high-skilled accountants.
119. Which of the following could explain the changing gap in income between unskilled and skilled
workers in the United States?
a. International trade has decreased the domestic demand for skilled labor and increased the
domestic demand for unskilled labor.
b. Certain technological changes such as the introduction of computers have increased the
domestic demand for skilled labor and decreased the domestic demand for unskilled labor.
c. Both a and b are correct.
d. Neither a nor b is correct.
4782 Earnings and Discrimination
120. Over the past several years, the earnings gap between high-skilled and low-skilled workers has
(i) narrowed because the demand for unskilled labor has risen over time relative to the
demand for skilled labor.
(ii) widened because the demand for skilled labor has risen over time relative to the demand
for unskilled labor.
(iii) narrowed because the supply of unskilled labor has risen over time relative to the supply of
skilled labor.
(iv) widened because the supply of skilled labor has risen over time relative to the supply of
unskilled labor.
a. (i) only
b. (ii) only
c. (i) and (iii) only
d. (ii) and (iv) only
121. Over the past several years, the earnings gap between high-skilled and low-skilled workers has
widened because
(i) international trade has altered the relative demand for skilled and unskilled labor.
(ii) changes in technology have altered the relative demand for skilled and unskilled labor.
(iii) the return to education for men has decreased, whereas the return to education for
women has increased.
a. (i) only
b. (iii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)