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Earnings and Discrimination 4863
36. Which of the following is an example of labor-market discrimination? You may assume that
worker A and worker B have identical characteristics except for the ones listed. A firm offers a
higher salary to worker A than worker B because worker A
a. has more education.
b. is willing to work the night shift.
c. is a man, whereas worker B is a woman.
d. has better performance reviews, indicating higher productivity.
37. Which of the following is an example of labor-market discrimination? You may assume that
worker A and worker B have identical characteristics except for the ones listed. A firm offers a
higher salary to worker A than worker B because worker A
a. has more experience.
b. is willing to travel two weeks out of each month, whereas worker B will not travel more than
three nights a month.
c. has a special certification that directly relates to her job, whereas worker B does not.
d. is a young blonde woman, whereas worker B is an older, gray-haired man.
4864 Earnings and Discrimination
38. Allen and Ellen both work at Burger Ranch. Allen is paid more than Ellen. Which of the following
could explain why Allen is paid more?
a. The manager discriminates against women.
b. Allen works the undesirable early morning shift.
c. Allen has more experience and so more human capital.
d. All of the above could be correct.
39. George and Susan work at the same brewery. George works in advertising. Susan works as a
forewoman in the bottling plant. George is paid more than Susan.
a. Because the male worker earns a higher salary than the female worker, the employer must be
discriminating against women.
b. If George has better performance reviews than Susan, the company might be rewarding George
for his high productivity.
c. If forepersons at bottling plants typically earn more than employees in the advertising
department, then the brewery must be discriminating against women.
d. George might be earning more because he works the day shift while Susan works the night
shift.
Earnings and Discrimination 4865
40. Mary and Mike are twins who attended grammar school through college together. Both twins got
jobs in the same department of an accounting firm. They both work equally hard and have
received similar performance reviews. Mary earns $62,000 a year, and Mike earns $80,000 a
year. Select the best explanation for this wage difference.
a. Mary has less human capital than Mike.
b. Mary has more human capital than Mike.
c. Mike has been discriminated against because he is male.
d. Mary has been discriminated against because she is female.
41. Marcia is a white 23-year-old female, and Joan is a black 23-year-old female. Both Marcia and
Joan were economics majors, and they graduated from the same college in the same year with
the same GPA. Marcia and Joan both got identical jobs at a brokerage firm after graduating from
college. They both work equally hard. Marcia earns $38,000 a year, and Joan earns $30,000 a
year. Select the best explanation for this wage difference.
a. Marcia has less human capital than Joan.
b. Marcia receives a compensating wage differential that Joan does not.
c. Joan has been discriminated against because she is black.
d. Marcia has been discriminated against because she is white.
4866 Earnings and Discrimination
42. John is an Asian 23-year-old male, and Ken is an Asian 43-year-old male. Both John and Ken are
economics majors, and they graduated from the same college with the same GPA — John in 2006
and Ken in 1986. John and Ken are both financial advisers at the same brokerage firm. John
earns $52,000 a year, and Ken earns $88,000 a year. Select the best explanation for this wage
difference.
a. John has more human capital than Ken.
b. John has less human capital than Ken.
c. John has been discriminated against because he is young.
d. Ken has been discriminated against because he is old.
43. Harry is 40 and black. Dan is 40 and white. Both work as plumbers, but Harry earns more.
a. Dan is being discriminated against.
b. Harry might be discriminated against if he has more experience as a plumber.
c. Harry might be discriminated against if he has less training as a plumber.
d. Harry might be discriminated against if he works the day shift and Dan works the night shift.
Earnings and Discrimination 4867
44. Tiffany is a black 21-year-old female, and Danielle is a black 41-year-old female. Both Tiffany
and Danielle were accounting majors, and they graduated from the same college with the same
GPA — Tiffany in 2013 and Danielle in 1992. Tiffany and Danielle are both auditors at the same
accounting firm. Tiffany earns $63,000 a year, and Danielle earns $95,000 a year. Select the best
explanation for this wage difference.
a. Tiffany has more human capital than Danielle.
b. Tiffany has less human capital than Danielle.
c. Tiffany has been discriminated against because she is young.
d. Danielle has been discriminated against because she is old.
45. Al and Steve are both reporters at the same newspaper. Al is black and Steve is white. Al earns
less than Steve.
Which of the following can explain why Al earns less?
a. Although both have BA’s in Journalism, Al’s K-12 and college education were of a lower
quality than Steve’s.
b. Al has greater experience.
c. Al works the night shift and Steve works the day shift.
d. Al writes editorials which are very popular with customers, while Steve covers the police
report which fewer subscribers read.
4868 Earnings and Discrimination
46. Which of these instances would constitute labor-market discrimination? Henry receives a higher
wage than Ryan.
Henry and Ryan are identical in all of their labor-market characteristics except that
a. Henry is a college graduate, and Ryan has only a high school diploma.
b. Henry has 10 years of experience at his job, whereas Ryan has only five years of experience.
c. Henry is white and Ryan is Black.
d. by objective measures Henry consistently outperforms Ryan.
47. People who grew up in the western part of Aquilonia have an accent distinct from people who
grew up in the eastern part of the country. People from the west also receive lower wages than
people from the east. From this information alone, we can conclude that it is possible that
a. discrimination against people from the west exists.
b. people from the east receive compensating differentials.
c. people from the west have lower levels of human capital.
d. All of the above could be correct.
Earnings and Discrimination 4869
48. In the country of Freedonia, men and women have the same level of education and choose
different forms of work in the same proportions. The only real difference is that men typically stay
home to raise young children, returning to the work force after their children enter elementary
school. If no discrimination exists, then we would expect that, on average,
a. women would earn less than men.
b. women would earn more than men.
c. men and women would earn the same wage.
d. wage differences between men and women would be due to differences in beauty.
49. Which of these instances would constitute labor-market discrimination? Courtney and Nicole are
identical in all of their labor-market characteristics except that Courtney earns a higher salary
than Nicole because
a. Courtney is beautiful and Nicole is not.
b. Courtney is 40 years old and Nicole is 60 years old.
c. Courtney works the night shift and Nicole works the day shift.
d. Courtney attended on the job-training seminars which allows her to do tasks Nicole is not
qualified for.
4870 Earnings and Discrimination
Scenario 19-3
In the small town of Hamilton, Montana, there is a local hardware store called Eddy's Hardware.
There are only two types of workers who apply for jobs at Eddy's Hardware: cowboys and farm
boys. Local politicians have received numerous complaints that Eddy's Hardware is practicing
wage discrimination against farm boys. Eddy's Hardware denies the complaint and says the store
is only trying to maximize profit.
50. Refer to Scenario 19-3. Which of the following statements would weaken the discrimination
complaint against Eddy's Hardware?
a. Farm boys are more productive than cowboys.
b. Farm boys work longer hours than cowboys and their effort is greater.
c. Farm boys are generally less educated than cowboys in the field of hardware.
d. All of the above would weaken the discrimination complaint.
51. Refer to Scenario 19-3. Which of the following statements would strengthen the discrimination
complaint against Eddy's Hardware?
a. Cowboys call in sick to work more often than farm boys.
b. Farm boys are more likely than cowboys to work the day shift rather than the night shift.
c. Cowboys' experience using hardware generally exceeds farm boys' experience using it.
d. On average farm boys have less experience working at the hardware store than cowboys.
Earnings and Discrimination 4871
52. Major league baseball players get paid more than minor league baseball players because of
a. compensating differentials.
b. higher levels of educational attainment.
c. greater abilities.
d. All of the above are correct.
53. That some schools direct females away from science and math courses is evidence of
a. labor-market discrimination
b. discrimination that occurs prior to people entering the labor market
c. discrimination by customers
d. discrimination by employers
4872 Earnings and Discrimination
54. Two economists created fake resumes with either common African-American names such as
Lakisha and Jamal or common white names such as Emily and Greg. After sending them to
potential employers with “Help Wanted” ads in Boston and Chicago newspapers, they found that
a. black employees earned 50 percent less than white employees in Chicago but that blacks and
whites had similar wages in Boston.
b. black employees earned 50 percent less than white employees in Boston but that blacks and
whites had similar wages in Chicago.
c. job applicants with white names received 50 percent more phone calls from interested
employers.
d. job applicants with white names received 7 percent more phone calls from interested
employers.
55. A study conducted by economists Marianne Bertrand and Sendhil Mullainathan found evidence of
labor-market discrimination based on which of the following findings?
a. Restaurant customers preferred to be waited on by white waitresses rather than black
waitresses.
b. Black basketball players earned more than white basketball players.
c. Employers were more likely to request interviews with job applicants with “white” names such
as Greg than from applicants with “black” names such as Jamal.
d. Employers were more likely to request interviews with job applicants with “masculine” names
such as Mark than from applicants with “feminine” names such as Lisa.
Earnings and Discrimination 4873
56. Which of the following factors does not affect the value of a worker's marginal product?
a. discrimination against a particular group of workers by a firm's customers
b. a worker's level of disposable income
c. a worker's level of human capital
d. compensating wage differentials
57. Discrimination by a manager in the hiring process
a. decreases the firm’s costs.
b. increases the firm’s costs.
c. is evident if a white manager refuses to hire a certain black applicant.
d. is evident if a male manager fails to hire a certain female applicant.
58. Economists are skeptical that discrimination is employer driven because
a. discrimination cannot exist in markets.
b. employers are not really interested in maximizing profit.
c. employers typically base wages paid on the prevailing market wage.
d. holding productivity constant, a profit-maximizing employer will hire the cheapest labor
available.
4874 Earnings and Discrimination
59. Suppose that an employer can hire workers with brown hair and workers with blonde hair. Each
type of worker has the same productivity. Which of the following is correct if the employer
discriminates by hiring only workers with brown hair?
a. The employer will be just as efficient as a nondiscriminating employer.
b. The employer will face higher costs than firms that focus only on maximizing profits.
c. The employer will immediately go out of business because discrimination is illegal.
d. The employer will face union strikes.
60. Evidence suggests that business owners are generally
a. interested in profits only when discrimination is illegal.
b. more interested in discrimination than in making a profit.
c. unable to determine the link between discrimination and profitability.
d. more interested in making a profit than in discriminating against a particular group.
61. Firms that operate in competitive product markets and choose to practice discrimination in hiring
workers
a. will survive if they increase production and garner a larger market share.
b. will eventually earn zero economic profits.
c. will survive as long as they are willing to have a smaller market share.
d. are likely to eventually go out of business.
Earnings and Discrimination 4875
62. Why would a wage differential due to discrimination in hiring be unlikely to persist in a
competitive labor market?
a. There is a cost advantage for firms that do not discriminate.
b. Workers who are victims of discrimination will eventually drop out of the labor market.
c. Competing firms will hire fewer of the workers who are temporarily victimized by
discrimination.
d. Discrimination cannot exist in markets.
63. In what way do competitive markets have a "natural remedy" for discriminatory hiring practices?
a. Governments regulate to resolve problems of discrimination.
b. Profit-maximizing firms that do not discriminate tend to replace firms that discriminate.
c. Wages paid to groups that are victimized by discrimination are eventually bid up to above-
equilibrium levels.
d. Discrimination is usually the outcome of rational decision-making processes, and competitive
markets produce rational outcomes.
64. A natural correction to employer discrimination in market economies is the
a. threat of judicial review.
b. profit motive.
c. political process.
d. union movement.
4876 Earnings and Discrimination
65. The profit motive counteracts
a. consumer discrimination.
b. discrimination in sports.
c. the beauty premium.
d. None of the above is correct.
66. Some economists are skeptical of the argument that employers are responsible for discriminatory
wage differences. They argue that market economies provide a natural remedy to employer
discrimination, and that remedy is
a. social responsibility.
b. the profit motive.
c. fear of reprisal from groups that suffer from those wage differences.
d. fear of reprisal from government in the form of prosecution.
Earnings and Discrimination 4877
67. Economists argue competitive markets provide a “natural remedy” to discriminatory wage
practices. Which of the following is widely recognized as a potential limit to the effectiveness of
that natural remedy?
a. Some workers are members in unions.
b. Some firms pay efficiency wages; others do not.
c. Some customers are discriminatory in their buying habits.
d. Some employees have accumulated more human capital than other employees.
68. In the presence of discrimination by customers,
a. market forces nevertheless always work to prevent discriminatory wage differentials.
b. discriminatory wage differentials can exist, but only if firms refrain from maximizing their
profits.
c. discriminatory wage differentials can exist, but only if government reinforces customers’
practices by
passing laws that mandate discrimination.
d. discriminatory wage differentials can exist, even in the absence of discriminatory practices by
firms or by government.
4878 Earnings and Discrimination
69. It is argued that competitive markets provide a “natural remedy” to discriminatory wage practices.
Which of the following is widely recognized as a potential limit to the potency of that natural
remedy?
a. Governments sometimes mandate discriminatory practices.
b. Some employees have a lot of job experience; others have little job experience.
c. In a discriminatory environment, a competitive firm that takes prices and wages as given has
nothing to gain from any particular choice it makes regarding who to hire or which customers
to serve.
d. Not all firms exhibit social responsibility in sufficient measure to counter discriminatory wage
practices.
70. Discrimination by a manager in the hiring process may be consistent with the decision to maximize
profits if
a. customers are willing to pay higher prices in order to maintain the discrimination.
b. the discrimination is based on race but not gender.
c. the discrimination is based on gender but not race.
d. Discrimination is never consistent with profit maximization.
Earnings and Discrimination 4879
71. Which of the following is an example of customer discrimination?
a. A foreign government prevents women from legally working as teachers.
b. White theater goers prefer to watch movies with white stars rather than black stars.
c. Customers prefer more experienced lawyers over less experienced ones.
d. All of the above are correct.
72. Which of the following is an example of customer discrimination?
a. European soccer players earn more than U.S. soccer players since soccer is more popular in
Europe.
b. Male basketball players in the NBA earn higher salaries than female basketball players in the
WNBA since viewers prefer watching NBA games.
c. Golfers on the men’s PGA tour earn more than golfers on the women’s LPGA tour since
people prefer watching the men play golf.
d. All of the above are examples of customer discrimination.
4880 Earnings and Discrimination
73. A study of segregated streetcars in the southern United States in the early twentieth century
found which of the following?
a. Firms that ran the streetcars were more interested in segregating customers by race than
profits.
b. The firms that ran the streetcars were unanimous in their support of laws that required
segregation of races.
c. Before the passage of laws that mandated segregation of races on streetcars, segregation of
smokers and nonsmokers was more common than segregation of races.
d. Segregation based on gender was more common than race at first.
74. When firms focus on profit maximization, which form of wage discrimination is least likely to
occur?
a. discrimination based on race
b. discrimination in sports
c. consumer discrimination
d. discrimination based on educational attainment
Earnings and Discrimination 4881
75. The fact that wage differentials continue to exist across different groups of workers leads
economists to believe that
a. discrimination by customers is the most common type of economic discrimination.
b. differences in human capital and job characteristics must be important in explaining the
differences in wages.
c. firms apparently are not profit maximizers.
d. the market has failed to properly allocate wages to different workers.
76. Some discriminatory hiring practices can be expected, even if markets are competitive, as a result
of
a. unrestricted entry and exit in markets.
b. lower costs of hiring.
c. a perfectly elastic market demand.
d. customer preferences.
77. A competitive market may be consistent with a discriminatory wage differential if
a. firms' customers have discriminatory preferences.
b. the wage differential is explained by a compensating differential.
c. the wage differential is explained by differences in human capital.
d. All of the above are correct.
4882 Earnings and Discrimination
78. Business owners who care only about making money are
a. likely to discriminate against certain groups of workers.
b. likely to be replaced by discriminating businesses.
c. more concerned about racial discrimination than gender discrimination.
d. at an advantage when competing against those who practice discrimination.
79. If there is systematic discrimination against a group of workers, then the wage paid to those
workers likely will be
a. lower due to a higher supply of workers in that group.
b. lower due to a lower demand for workers in that group.
c. higher due to a lower supply of workers in that group.
d. higher due to a higher demand for workers in that group.
80. If employers are profit-maximizers, then
a. competition will always eventually eliminate employment discrimination.
b. employment discrimination may persist if consumers discriminate.
c. employment discrimination will persist because it is always profitable.
d. compensating differentials cannot exist.
