Earnings and Discrimination 4743
41. Jobs that involve pleasant work, as opposed to jobs that involve unpleasant work, usually pay
a. higher wages, because jobs that involve pleasant work typically require more education than do
jobs that involve unpleasant work.
b. higher wages, because jobs that involve pleasant work typically require more well-developed
personality skills than do jobs that involve unpleasant work.
c. lower wages, because workers typically are not attracted to jobs that involve unpleasant work
unless there is a monetary inducement.
d. lower wages, because workers who take jobs that involve unpleasant work typically stay in
those jobs for relatively long periods of time and accumulate significant experience.
42. Who among the following individuals most likely experiences the largest nonmonetary reward as a
supplier of labor? Assume all of the four individuals have the same level of education and work
the same number of hours per week.
a. Albert, who prefers not to socialize and works at home by himself
b. Amy, whose job provides little intellectual and personal satisfaction
c. Antoinette, whose preference is to avoid dangerous work but works as a firefighter
d. Arnold, who works the night shift but would prefer to work during the day and sleep at night
4744 Earnings and Discrimination
43. Callie has just graduated from Hairs-R-Us Beauty School with a license to cut hair. She can earn
$15 an hour styling hair at the local hair salon or $20 an hour styling hair at the local funeral home.
The higher wage offered by the funeral home is an example of
a. a human capital differential.
b. a compensating differential.
c. signaling theory.
d. the superstar phenomenon.
44. 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
a. a compensating differential.
b. signaling theory.
c. an efficiency wage.
d. efficient union bargaining.
Earnings and Discrimination 4745
45. Which of the following is an example of a compensating differential?
a. Two workers with different undergraduate majors earn different salaries.
b. Two workers with different years of experience earn different salaries.
c. Two workers whose jobs entail different risks earn different salaries.
d. Two workers with different levels of personal attractiveness earn different salaries.
46. Which of the following is an example of a compensating differential?
a. Two workers with different levels of on-the-job training earn different salaries.
b. Two workers whose jobs entail different working conditions earn different salaries.
c. Two workers whose jobs require different levels of technical expertise earn different salaries.
d. Two workers with different levels of natural ability earn different salaries.
4746 Earnings and Discrimination
47. Which of the following is not an example of a compensating differential? Job A pays more than
Job B because Job A requires
a. more international travel to dangerous locations.
b. two night shifts per month.
c. careful handling of toxic chemicals.
d. an advanced degree.
48. Job A is hard, dull, and dangerous. Job B is easy, fun, and safe. All else equal, we would expect
Job A to pay
a. higher wages than Job B because the labor supplied for Job B will be greater.
b. lower wages than Job B because the labor supplied for Job B will be greater.
c. higher wages than Job B because the labor supplied for Job A will be greater.
d. lower wages than Job B because the labor supplied for Job A will be greater.
Earnings and Discrimination 4747
49. A compensating differential refers to differences in pay due to
a. productivity levels of workers.
b. signaling differences of workers.
c. nonmonetary characteristics of jobs.
d. All of the above are correct.
50. Which of the following is an example of a compensating differential?
a. paying workers with more years of experience higher wages than workers with fewer years of
experience, all else equal
b. paying workers who work on the day shift lower wages than workers who work the night shift,
all else equal
c. paying accountants who have passed the Certified Public Accountant exam higher wages than
accountants who have not passed it, all else equal
d. All of the above are examples of compensating differentials.
4748 Earnings and Discrimination
51. Which of the following is not an example of a compensating differential?
a. paying workers who do dull, boring work higher wages than workers who do fun, interesting
work, all else equal
b. paying workers who work on the night shift higher wages than workers who work the day shift,
all else equal
c. paying workers who do more dangerous work higher wages than workers who do less
dangerous work, all else equal
d. paying workers with PhDs higher wages than workers with BAs, all else equal
52. Coal mining is a dangerous and dirty job. Suppose someone developed new machinery that made
coal mining safer and cleaner; at the same time, suppose it made coal miners more productive.
We would expect that the wages of coal miners would
a. rise.
b. fall.
c. stay exactly the same.
d. rise, fall, or stay the same.
Earnings and Discrimination 4749
53. Adam and Bob are identical twins who attended grammar school through high school together.
Adam got a job after high school, and Bob got a job after graduating from college. Adam earns
$36,000 a year, and Bob earns $69,000 a year. Select the best explanation for this wage
difference.
a. Adam has less human capital than Bob.
b. Bob has less human capital than Adam.
c. Adam has received a compensating differential
d. Adam is a member of a union.
54. Jake and Zach are identical twins who attended grammar school through college together. Jake
took a job as an engineer who does not have to travel out of the state. Zach took a job as an
engineer who must travel out of state once a week. Jake earns $125,000 a year, and Zach earns
$155,000 a year. Select the best explanation for this wage difference.
a. Zach puts in less effort than Jake.
b. Zach has less human capital than Jake.
c. Zach receives a higher wage to compensate for the disagreeable nature of business travel.
d. Jake’s lower salary supports the signaling theory of education.
4750 Earnings and Discrimination
55. The accumulation of investments in people, such as education and on–the-job training, is known as
a. physical capital.
b. human capital.
c. efficiency wage.
d. compensating differentials.
56. Which of the following is not an example of capital used in production?
a. a teacher’s chalkboard
b. a manufacturer’s factory
c. a landscaper’s time
d. an accountant’s education
Earnings and Discrimination 4751
57. Which of the following is considered human capital?
a. the ingredients a chef uses to prepare meals
b. the pots and pans and other tools a chef uses to prepare meals
c. the financial capital a chef uses to start his own restaurant
d. the skills a chef learns when attending a class about cake decorating
58. Which of the following is not considered human capital?
a. the golf clubs a professional golfer uses to play golf
b. the skills a professional golfer has gained by practicing on the driving range
c. the professional golfer’s knowledge of how to play a better game learned from talking with
other players
d. none of the above would be considered human capital
4752 Earnings and Discrimination
59. Which of the following would be considered human capital?
a. the financial capital a person earns over a lifetime of investing
b. the machinery a worker uses to produce a product
c. the training a worker receives when starting a new job
d. the break room in a factory where employees go to have coffee
60. Which of the following is an example of human capital?
a. Machines built by people.
b. Formal education acquired in schools.
c. On–the–job training.
d. Both b and c are correct.
Earnings and Discrimination 4753
61. Human capital is
a. an important determinant of wages, but it does not affect the production of goods and services.
b. an important determinant of wages, and it affects the production of goods and services.
c. a specific type of physical capital made by humans rather than machines.
d. very different from physical capital in that physical capital represents an investment, while
human capital does not represent an investment.
62. Human capital is
a. a stock of equipment and structures.
b. the result of investments workers make in themselves such as on-the-job training.
c. a difference in wages that arises to offset the nonmonetary characteristics of different jobs.
d. inversely related to the supply of workers.
4754 Earnings and Discrimination
63. Human capital is
a. a stock of equipment and structures.
b. the result of investments workers make in themselves such as education.
c. a difference in wages that arises to offset the nonmonetary characteristics of different jobs.
d. a characteristic that affects a worker’s self-esteem but not her wages.
64. Which of the following would be considered an investment in human capital?
a. education
b. a teacher’s blackboard
c. the purchase of a new computer to enhance labor productivity
d. All of the above are correct.
Earnings and Discrimination 4755
65. Which of the following is an example of human capital for a college economics professor?
a. years of experience
b. “clickers” which interface with an in-class computer system and display the results of student
“votes”
c. chalk
d. internet access in the classroom
66. Which of the following is not an example of human capital for a college economics professor?
a. years of experience
b. a doctorate in economics
c. chalk
d. what the professor has learned from seminar courses on effective teaching methods
4756 Earnings and Discrimination
67. Education raises wages because the demanders of labor
a. are willing to pay more for highly educated workers who have higher marginal products and the
suppliers of labor are willing to pay the cost of becoming educated only if they are rewarded.
b. are willing to pay the cost of becoming educated only if they are rewarded and the suppliers of
labor are willing to pay more for highly educated workers who have higher marginal products.
c. require fewer workers if they are highly educated.
d. None of the above is correct.
68. In general, the higher a person’s education level,
a. the higher the person‘s earnings.
b. the more physically attractive the person is likely to be.
c. the more socially outgoing the person is likely to be.
d. All of the above are correct.
Earnings and Discrimination 4757
69. Which of the following is the most important contributor to human capital?
a. education
b. effort
c. chance
d. physical strength
70. The return to investment in human capital is observed
a. only when workers are assigned identical tasks.
b. in the wage differential between workers.
c. in the high school dropout rate in inner-city urban school districts.
d. in the low wages of educated factory workers.
71. The wage difference between jobs that require education and those that don‘t
a. is not likely to be related to productivity differences.
b. is a barrier to obtaining an education.
c. does not affect the supply of workers in the different labor markets.
d. encourages workers to bear the cost of acquiring education.
4758 Earnings and Discrimination
72. A difference in wages between a highly-educated worker and a less-educated worker
a. may be due to a difference in the amounts of human capital between the workers.
b. may be a signal that the market is indifferent to a worker’s level of human capital.
c. is considered unfair by economists.
d. is considered unfair by everyone.
73. The time spent by students in college
a. leads to lower lifetime earnings because opportunity costs are high.
b. is an investment in human capital.
c. decreases human capital by lowering work experience.
d. increases as the wages paid to low-skilled workers rise.
74. Expenditures on human capital
a. reflect an expectation of some future return on the investment.
b. are generally embodied in a specific individual.
c. reflect an investment of resources today to raise productivity in the future.
d. All of the above are correct.
Earnings and Discrimination 4759
75. People are willing to invest in human capital because
a. the demand for skilled labor is higher than for unskilled labor.
b. it increases the marginal product of their labor.
c. firms are willing to pay more for more productive workers.
d. All of the above are correct.
76. When an employer pays the cost of educating a worker, it is likely that the employer
a. is demonstrating altruistic motives.
b. is pursuing some objective other than profit-maximization.
c. hopes to recapture his investment in the form of increased labor productivity.
d. receives reimbursement from the government for the cost of the education.
4760 Earnings and Discrimination
77. After an employer pays the cost of educating a worker,
a. the worker has a higher level of human capital.
b. the worker should become more productive.
c. the worker might look for another job unless his employer pays him more.
d. All of the above are correct.
78. Workers with more human capital on average earn substantially higher pay than workers with less
human capital in
a. most countries but not in the United States.
b. the United States but not in most other countries.
c. the United States and in most other countries.
d. None of the above is correct; the evidence fails to indicate that human capital is a significant
factor in determining earnings anywhere in the world.
Earnings and Discrimination 4761
79. A prestigious private high school requires each of its teachers to have a Ph.D. in the subject they
teach. This requirement is likely to
a. increase the supply of teachers to this school.
b. increase wages for teachers at the private school relative to those at public schools.
c. decrease the marginal product of teachers at the private school.
d. All of the above are correct.
80. The ownership of human capital
a. is typically embodied in related physical capital.
b. may be subject to government restrictions on transferability.
c. is not easily transferable.
d. All of the above are correct.
4762 Earnings and Discrimination
81. Store clerks are known to have low wages. This is likely to reflect the fact that
a. store clerk jobs are perceived to be relatively easy, thus attracting low-skill workers.
b. store clerk jobs are perceived to be relatively difficult, thus attracting high–skill workers.
c. many people perceive the job of store clerk as having significant risk of death on the job.
d. store clerks are required to have a college degree.
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.
82. 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. wages are unlikely to be affected by job requirements.
b. since the lifeguard job would expose him to a threat of skin cancer, the wage will be low.
c. if the lifeguard job has a requirement for special training or certification, the wage offer will be
higher than otherwise.
d. if the lifeguard job also requires a willingness to clean public restrooms, the wage offer will be
lower than otherwise.