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Earnings and Discrimination
Multiple Choice – Section 01: Some Determinants of Equilibrium Wages
1. When the supply of workers is plentiful, one would predict that market wages would be
a. determined outside the domain of economic theory.
b. determined solely by factors that affect demand.
c. low, other things equal.
d. high, other things equal.
2. Other things equal, when the supply of workers is low, one would predict that market wages would
be
a. relatively high.
b. relatively low.
c. determined solely by factors that affect demand.
d. determined outside the domain of economic theory.
4724 Earnings and Discrimination
3. Other things equal, one would predict that market wages would be relatively high when
a. the supply of labor is high.
b. the demand for labor is low.
c. the supply of labor is low.
d. Both (a.) and (b.) are correct
4. Westland and Oceania have just started to trade with each other. Westland exports goods produced
with skilled labor and imports goods made with unskilled labor from Oceania. Over time, we would
expect that in Oceania the wages of unskilled workers will
a. rise, and the wages of skilled labor will fall.
b. fall, and the wages of skilled labor will rise.
c. rise, and the wages of skilled labor will rise.
d. fall, and the wages of skilled labor will fall.
Earnings and Discrimination 4725
5. The characteristics of jobs and workers affect
a. labor supply.
b. labor demand.
c. equilibrium wages.
d. All of the above are correct.
6. Difference in wages can be explained by differences in
a. job characteristics and worker characteristics.
b. job characteristics but not worker characteristics.
c. worker characteristics but not job characteristics.
d. neither worker characteristics or job characteristics.
4726 Earnings and Discrimination
7. A difference in wages that arises to offset the nonmonetary characteristics of different jobs is
known as
a. a compensating differential.
b. an inefficiency wage.
c. the equilibrium difference.
d. a union wage.
8. Other things the same, we’d expect that a job with less pleasant working conditions pays
a. more; this is known as an efficiency wage.
b. more; this is known as a compensating differential.
c. less; this is known as an efficiency wage.
d. less; this is known as a compensating differential.
Earnings and Discrimination 4727
9. A compensating differential is
a. a difference in pay due to nonmonetary characteristics of different jobs.
b. a high wage paid by employers to entice workers to be more productive.
c. the difference between the quantity of labor supplied and the quantity of labor demanded at the
minimum wage.
d. due only to difference in the productivity of workers with different skills.
10. The term "compensating differential" refers to
a. the fact that workers who do similar work should be paid the same wage.
b. the fact that some workers live further from their jobs than do other workers.
c. a wage difference that is due to unionization of some firms but not others.
d. a wage difference that arises from nonmonetary characteristics of different jobs.
4728 Earnings and Discrimination
11. A difference in wages that reflects differences in the nonpay features of two jobs is called
a. a compensating differential.
b. a wage adjustment.
c. an efficiency wage.
d. a minimum wage.
12. Which term do economists use to refer to a difference in wages that arises from nonmonetary
characteristics of different jobs?
a. non-pecuniary differentials
b. compensating differentials
c. fundamental differences
d. idiosyncratic differences
Earnings and Discrimination 4729
13. Wages of doctors tend to be higher than wages of bankers. Which of the following is a
compensating differential explaining the difference in wages?
a. Doctors have the stress of being responsible for other peoples’ lives while bankers do not.
b. Doctors are on call to work nights and weekends, while bankers work traditional business
hours.
c. Doctors must pay for malpractice insurance in case they are sued for a mistake on the job.
d. All of the above are compensating differentials.
14. Which of the following is not an example of a compensating differential?
a. Chris is a consultant who is paid more than other workers with similar skills because he is
required to travel 80% of the time.
b. Abby is a teacher who is paid less than other workers with similar skills because she does not
have to work during the summer months.
c. Ben is a businessman who is paid more than other workers with similar skills because he
graduated from a prestigious university with honors.
d. Daphne is a skyscraper window-washer who is paid more than other workers with similar skills
because of the risk she faces in her daily job.
4730 Earnings and Discrimination
15. Construction work is much riskier than working as a server at a restaurant. As a result, we'd
expect a difference in wages between the two jobs. The difference is known as
a. an efficiency wage.
b. a compensating differential.
c. a wage adjustment.
d. a minimum wage.
16. As a summer job, some teenagers choose to detassle corn, a job requiring long hours walking corn
fields in the summer heat. Other teens take jobs working as lifeguards. Given that detassling corn
is a more difficult job than working as a lifeguard, we would expect a difference in wages
between the two jobs. This difference is known as
a. an efficiency wage.
b. a compensating differential.
c. a wage adjustment.
d. a minimum wage.
Earnings and Discrimination 4731
17. Many kindergarten teachers have advanced education degrees, yet they have lower average
earnings than other individuals with similar education levels. A potential explanation for the
differences in earnings is that kindergarten teachers
a. have more pleasant working conditions.
b. have less pleasant working conditions.
c. work longer hours.
d. must pass certification tests.
18. Suppose that a company hires recent college graduates for two types of jobs, sales people and
credit analysts. The hours worked and skill levels are the same for both positions. The sales
people get to travel to several desirable locations, whereas the credit analysts do not leave the
home office. When comparing the salaries of the two positions, it is likely that the company pays
the
a. sales people less as a compensating differential.
b. credit analysts less as a compensating differential.
c. same salary for both positions because they require the same skill level.
d. same salary for both positions because it would be illegal to do otherwise.
4732 Earnings and Discrimination
19. Suppose that a company hires recent college graduates for two types of jobs, sales people and
credit analysts. The hours worked and skill levels are the same for both positions. The sales
people must “cold call,” which many people find to be unpleasant. When comparing the salaries of
the two positions, it is likely that the company pays the
a. credit analysts more as a compensating differential.
b. sales people more as a compensating differential.
c. same salary for both positions because they require the same skill level.
d. same salary for both positions because it would be illegal to do otherwise.
20. A company has two locations where it employs workers doing the same job and working the
same hours. Other things the same most workers would prefer to live in location A, but location A
has a higher cost of living than location B.
a. The company likely needs to pay workers in location A more.
b. The company likely needs to pay workers in location B more.
c. It’s not clear if the company would need to pay more to workers in location A or location B.
d. The company must pay workers the same amount.
Earnings and Discrimination 4733
21. Workers who work the night shift are often paid more than those who do identical work on the
day shift. This is referred to as a
a. discriminatory wage practice.
b. compensating differential.
c. wage inequity.
d. a market inefficiency.
22. Factory workers who work the day shift earn less per hour than similarly-skilled factory workers
who work the night shift. The difference in pay is attributed to
a. the marginal product of labor.
b. the marginal product of capital.
c. diminishing marginal returns.
d. a compensating differential.
4734 Earnings and Discrimination
23. The statement that "night shift workers make a higher wage than day shift workers" is likely to
reflect the fact that
a. most people's preference is to work the day shift.
b. some people prefer to work a night shift for nonmonetary reasons.
c. night shift jobs are generally more technically difficult.
d. more women than men work the night shift.
24. Since people get sick at all hours of the day, some nurses who work in hospitals are required to
work the night shift.
In most cases, the nurses who work the night shift earn a higher hourly wage for the same work
as the nurses who work the day shift. This difference in pay is referred to as a
a. discriminatory wage practice.
b. compensating differential.
c. wage inequity.
d. a market inefficiency.
Earnings and Discrimination 4735
25. Nurses who work in hospitals often are required to work on weekends, whereas nurses who work
in doctors’ offices generally only work Monday through Friday. Hospital nurses who must work
on weekends are usually paid more than nurses working in doctors’ offices for the same work
even if they have the same skills and education.
This difference in pay is attributed to
a. an efficiency wage.
b. compensating differential.
c. differences in the marginal product of labor.
d. differences in human capital.
26. If a worker is indifferent between a job with a wage of $10 per hour and a job with a wage of
$12 per hour, then the
a. higher-paying job has a compensating wage differential of $2 per hour.
b. higher-paying job has a compensating wage differential of $12 per hour.
c. higher-paying job is intrinsically more attractive than the lower-paying job.
d. wage in the higher-paying job must eventually fall due to competition.
4736 Earnings and Discrimination
27. Sally and Harry both work at the local factory producing cars. Sally earns $22 per hour working
the day shift, and Harry earns $25 per hour working the night shift. Sally and Harry do the same
job, have the same experience, and have the same level of education. This means that the
a. higher-paying job has a compensating wage differential of $3 per hour.
b. higher-paying job has a compensating wage differential of $25 per hour.
c. higher-paying job is intrinsically more attractive than the lower-paying job.
d. factory is discriminating against Sally because she is a woman.
28. On average, electricians who work on dangerous high-voltage power lines earn more per hour than
similarly skilled electricians who don't work on dangerous high-voltage power lines. The
difference in pay is attributed to
a. the marginal product of labor.
b. the marginal product of capital.
c. diminishing marginal returns.
d. a compensating differential.
Earnings and Discrimination 4737
29. On average, truck drivers who drive on dangerous ice-covered roads earn more per mile driven
than similarly skilled truck drivers who drive on normal roads. The difference in pay can be
attributed to
a. the marginal product of labor.
b. the marginal product of capital.
c. diminishing marginal returns.
d. a compensating differential.
30. The statement that "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 mining jobs are potentially more dangerous than jobs with comparable education
requirements.
c. all coal mines use nonunion labor.
d. coal imports are rising.
4738 Earnings and Discrimination
31. Other things equal, a particular job will likely pay a higher wage if it involves
a. danger to the worker.
b. personal enjoyment for the worker.
c. intellectual stimulation for the worker.
d. All of the above are correct.
32. Park rangers at Yellowstone National Park are known to have low wages. This is probably
because
a. park rangers are required to be college graduates.
b. park rangers don't need much money to live.
c. park ranger jobs are perceived to be dangerous.
d. park ranger jobs are perceived to be "fun."
Earnings and Discrimination 4739
33. Which of the following comparisons best illustrates a compensating differential?
a. John's wage is higher than Jane's because the value of John's marginal product is higher than
Jane's.
b. Karl's wage is higher than Kay's because Karl is very personable, and Kay is very gruff.
c. Beth's wage is higher than Bill's because Beth's job may cause long-term health problems, and
Bill's job will not impair his health.
d. All of the above are good illustrations of compensating differentials.
34. Public school teachers are known to have low wages. Which of the following would push the
teachers’ wages lower?
a. Public school teacher jobs are difficult.
b. Public school teachers are required to be college graduates.
c. Public school teachers belong to a union.
d. Teaching in a public school has a high element of personal satisfaction.
4740 Earnings and Discrimination
35. A plumber who specializes in cleaning plugged sewer lines is typically paid a higher wage than a
plumber who works on installing water systems in new residential housing. Which of the following
would push the wages of plumbers who work on sewer lines higher?
a. Plumbers who work on new residential housing require more training than plumbers working on
sewer lines.
b. Plumbing jobs that involve sewer lines are likely to have a high element of personal satisfaction.
c. Plumbers who work with sewer lines are more likely to work the day shift.
d. plumbers who work with sewer lines are likely to be perceived as having a "dirty" job.
36. The job of night watchman at the Punxsutawny Phil Groundhog museum is known to have a high
wage. Which of the following would push the night watchman’s wage higher?
a. The job does not require specialized skills.
b. The job is easy.
c. The job is incredibly dull.
d. The job has minimal risk of injury.
Earnings and Discrimination 4741
37. Professional underwater divers are known to have high wages and work an average of only 20
hours per week. Which of the following would push the divers’ wages higher?
a. The job is simple.
b. The job is fun.
c. The job is very dangerous.
d. The job does not require specialized training.
38. Air-traffic controllers get paid high wages given their level of education. They also get frequent
breaks and may only work a few days a week. Which of the following could explain their high
wage?
a. the long breaks and limited work days
b. the stress they face
c. the comparatively low level of education required
d. All of the above are correct.
4742 Earnings and Discrimination
39. Assuming that all other things are equal, including the wage, which of the following statements is
correct?
a. The quantity of labor supplied for difficult jobs exceeds that for easy jobs.
b. The quantity of labor supplied for fun jobs exceeds that for dull jobs.
c. The quantity of labor supplied for dangerous jobs exceeds that for safe jobs.
d. All of the above are correct.
40. If government regulations make a certain job less dangerous, then we’d expect that the supply of
labor for that job
would
a. increase, which by itself would raise the wage for that job.
b. increase, which by itself would reduce the wage for that job.
c. decrease, which by itself would raise the wage for that job.
d. decrease, which by itself would reduce the wage for that job.
