60. The real wages of workers will tend to be high when
a.
output per worker is high.
b.
capital is scarce.
c.
industries are automating at a slow rate.
d.
profits are low.
61. Which of the following is most likely to cause the productivity of labor to increase?
a.
higher money wages
b.
a higher rate of investment in human and nonhuman capital
c.
more flexible working hours and improved retirement plans
d.
an increase in the proportion of the workforce that belongs to a labor union
62. Which of the following is true?
a.
When workers are more productive, the demand for their services will be higher.
b.
In order to earn a large income, one must provide large benefits to others.
c.
High productivity (a large output per hour worked) is the key to high earnings for both
individuals and countries.
d.
All of the above are true.
63. The linkage between high productivity and high earnings is vitally important because
a.
it provides individuals with a strong incentive to develop skills and engage in activities
that others value highly.
b.
high productivity (a large output per hour worked) is the key to high living standards.
c.
it brings the self-interest of individuals into harmony with economic progress.
d.
all of the above are true.
64. In a market economy, which of the following is most important if one is going to achieve high
earnings?
a.
hard work
b.
provision of goods and/or services that others value highly
c.
having a graduate degree in a field like history or sociology
d.
membership in a labor union
65. Suppose technological improvements reduced the cost of producing automobiles by 50 percent,
causing the price of automobiles to decline by a similar amount. Which of the following would
necessarily result from this development?
a.
Employment in the automobile industry would decrease.
b.
Real income would increase.
c.
Real income would decrease.
d.
Both a and c are correct.
66. Economic theory suggests that the standard of living of American workers would rise if
a.
the minimum wage were doubled.
b.
the knowledge and skills of workers improved.
c.
older workers were forced to retire earlier, opening up jobs for younger workers.
d.
technological setbacks lowered output per worker hour, increasing the number of jobs.
67. Economic theory suggests that the standard of living of American workers would fall if the
a.
knowledge and skills of workers improved, reducing the need for workers.
b.
United States had more natural resources.
c.
United States turned to more automated methods of production.
d.
productivity of American workers declined.
68. Economic theory suggests that the standard of living of American workers would rise if
a.
technological change increased output per worker.
b.
the minimum wage were doubled.
c.
automation were outlawed.
d.
a larger proportion of the labor force was unionized.
69. Firms will only adopt more automated methods of production when
a.
they reduce the need for workers.
b.
they lower production costs.
c.
they lengthen the production process.
d.
other firms in the industry are doing it.
70. Automated production methods are only attractive when they
a.
reduce labor productivity.
b.
replace workers.
c.
decrease per-unit costs of production.
d.
lower wages.
71. Technological progress generally has the effect of
a.
creating permanently higher levels of unemployment.
b.
freeing resources that can now go to other uses.
c.
lowering the national standard of living.
d.
doing all of the above.
72. Which of the following is true?
a.
Automated production processes are generally adopted regardless of whether they reduce
costs.
b.
Automated production processes eliminate jobs and, thereby, endanger our future living
standards.
c.
Cost-reducing automated production techniques will expand output directly and/or release
scarce resources for the expansion of output in other areas.
d.
Use of the most advanced technology will always minimize the cost of a productive
activity.
73. Proponents of the view that the higher rate of productivity growth since 1996 is part of a long-run
trend argue it is a result of
a.
a continuing increase in the use of computers and other kinds of information technology.
b.
employers forcing more output from workers, who have become victims of new
technologies.
c.
the shrinkage of the labor force, so that output per worker is rising.
d.
the rise of employment in the highly productive manufacturing sector.
74. Evidence suggests that education raises the earnings of the workforce mainly by
a.
increasing the marginal productivity of labor.
b.
keeping young people out of the labor force, thereby reducing the supply of labor.
c.
teaching workers how to demand more pay.
d.
teaching people to read and write, although education beyond this point does not seem to
increase worker productivity.
75. Within an occupation, when a given job provides steadier work (fewer layoffs), the hourly wage tends
to be
a.
lower than wage rates in jobs that are otherwise similar.
b.
higher than wage rates in jobs that are otherwise similar.
c.
no different from wage rates in jobs that are otherwise similar.
d.
determined by factors other than supply and demand.
76. Which of the following is most likely to decrease the market wage rate in a job category?
a.
The employer provides a generous pension plan.
b.
The work is widely viewed as safe and not stressful.
c.
The job is widely viewed as interesting and prestigious.
d.
all of the above
77. The fact that some people will work hard to earn a lot of money while others will be content with
much less income indicates that
a.
worker preferences are an important source of earning differentials.
b.
economics ranks one set of worker preferences as more desirable than another.
c.
some people can be paid less for doing hard work while others have to be paid a premium
for doing a similar task.
d.
skill levels of laborers are a minor consideration in wage rate determination.
78. A compensation structure that generates much higher pay rates for the top performers, while those
whose productivity is only a little lower receive substantially less compensation is called
a.
tournament pay.
b.
competing differentials.
c.
dueling executives.
d.
winner take all.
79. Assume that empirical evidence shows a difference in mean earnings between two groups, say,
majority and minority workers. What conclusion may be drawn?
a.
The group with the lower earnings is being discriminated against.
b.
The group with the lower earnings is less productive.
c.
The group with the higher earnings has a larger quantity of human capital.
d.
Any of the above statements could, either partially or entirely, explain the difference in the
mean earnings.
80. If a firm refuses to hire any minorities due to a personal prejudice, its profits will
a.
increase markedly.
b.
decrease.
c.
not be affected.
d.
increase slightly.
81. (I) Productivity growth in the United States since 1996 has been more rapid than it was during the
previous two decades.
(II) Economists believe that the more rapid productivity growth since 1996 is in large part due to the
computer revolution and related technological innovations.
a.
Both I and II are true.
b.
I is true; II is false.
c.
I is false; II is true.
d.
Both I and II are false.
82. Economic theory suggests that the standard of living of American workers would rise if
a.
the minimum wage were doubled.
b.
automation was outlawed.
c.
the amount of physical capital increased.
d.
technological setbacks lowered output per worker hour.
83. (I) Differences in worker productivity are one major reason why individual earnings differ.
(II) Even if all workers were identical, differences in the desirability of jobs would still cause
earnings differentials.
a.
Both I and II are true.
b.
I is true; II is false.
c.
I is false; II is true.
d.
Both I and II are false.
84. Which of the following best states the relationship between machinery and the earnings of labor?
a.
Machines tend to reduce the demand for labor, thereby reducing the earnings rate of labor.
b.
Production of machinery creates jobs, thereby increasing the demand for (and wages of)
labor.
c.
High productivity per worker hour is a necessary ingredient for the attainment of high real
earnings, and adoption of labor-saving machinery enhances the ability of labor to attain
such high productivity.
d.
Output and real earnings can always be increased whenever a machine can be substituted
for a function previously performed by labor.
85. If large numbers of young Americans thought the life of a cowhand was great (despite the hardships),
we would expect
a.
an increase in the wages of cowhands.
b.
a decrease in the wages of cowhands because supply would be enlarged.
c.
no impact on wages, which are determined by supply and demand, not preferences.
d.
a decrease in the wages of cowhands because demand would be reduced.
86. If customers are racist but employers are not, then employment discrimination will be
a.
less profitable than nondiscrimination.
b.
more profitable than nondiscrimination.
c.
equally profitable as nondiscrimination.
d.
easier to eliminate than if employers were racist but customers were not.
87. Under a tournament pay scheme, the pay gap between a few “winners” (those who receive big
promotions) and other employees exceeds the productivity differences between these two groups. The
reason firms might use such a scheme is that they
a.
overestimate the productivity of those who receive big promotions and inadvertently pay
them “too much.”
b.
gain tax advantages by paying a few workers large salaries and using fringe benefits to
compensate the rest of the employees.
c.
hope to raise the productivity of those who receive big promotions because marginal
productivity adjusts to equal wages.
d.
hope to raise the productivity of all other workers, who will work harder trying to gain a
big promotion.
88. Sue: “I much prefer eating at the El Grande Mexican Restaurant to the others in town because all of
their employees are Mexican and speak Spanish. It gives the place a real ‘authentic’ feel.” Which of the
following is true about the above statement?
a.
This is an example of customer-based discrimination for one group of employees over
another.
b.
Despite customer preferences, we would expect the restaurants in town to hire equally
from all racial and ethnic groups.
c.
If many customers felt the same way Sue does, there would be pressure for firms to satisfy
this consumer preference in their hiring.
d.
Both a and c are correct.
89. Which of the following best explains why productive workers can command high wages?
a.
the bargaining power of labor unions.
b.
the presence of minimum wage legislation.
c.
wage and price controls that reflect the political power of labor organizations.
d.
competition among employers for productive workers.
90. Which of the following is most likely to increase the money wages that will be required to attract a
given number of workers into a job category?
a.
the job is widely viewed as prestigious.
b.
the employer provides child care on the premises.
c.
the employer does not discriminate.
d.
the work is widely viewed as being stressful and dangerous.
91. In an economy in which the skills, preferences, and motivations of workers vary widely, equality of
wage rates would
a.
lead to shortages and surpluses of resources and the use of involuntary methods of
achieving work participation.
b.
result in a variety of product prices, but overall GDP would be unaffected.
c.
be efficient if the wages were fixed at a high enough level.
d.
reduce the productive incentives of high-skill workers, an effect that would be offset by
the increased work effort of low-skill workers.
92. If a firm refuses to hire any minorities due to a personal prejudice, its profits
a.
will increase markedly.
b.
will decrease.
c.
will not be affected.
d.
will increase slightly.
93. Which of the following would cause the demand for mathematicians to increase?
a.
a decrease in the productivity of mathematicians.
b.
an increase in the wage of mathematicians.
c.
an increase in the productivity of mathematicians.
d.
an increase in the productivity of physicists.
94. New technological advancements, such as robots are
a.
harmful because they put people out of work.
b.
helpful because they improve worker productivity.
c.
harmful because robots are likely to have electrical problems which could cause injuries to
people.
d.
both a and c above.
95. Which of the following is the clearest evidence of employment discrimination against minority
employees?
a.
the average wage of minority workers is lower than the average wage of whites.
b.
the average hours worked by minority employees exceeds the hours worked by whites.
c.
the mean number of years of schooling of minority workers is lower than that of whites.
d.
the average wages of minority employees are lower than the average wages of whites with
similar productivity characteristics.
96. Which of the following is true?
a.
employers who discriminate against blacks and other minorities will have lower costs than
rival firms that hire employees strictly on the basis of productivity.
b.
after adjusting for factors such as education, experience, and location, the earnings of
black men are almost identical to the earnings of white men.
c.
if minority and white employees in a skill category are equally productive, the profit
motive provides employers with a strong incentive to hire minority employees if they are
available at a lower wage.
d.
the empirical evidence indicates that the earnings gap between whites and blacks is
entirely the result of worker preference.
97. The major determinant of an individual’s income is
a.
whether or not her family is wealthy.
b.
how well she gets along with her co-workers and boss.
c.
how productive she is combined with demand for what she produces.
d.
how much she enjoys the work.
98. Which of the following is most likely to cause the productivity of labor to increase?
a.
higher money wages.
b.
an increase in the proportion of the workforce that belongs to a labor union.
c.
more flexible working hours and improved retirement plans.
d.
a higher rate of investment in human and nonhuman capital.
99. In a market economy, which of the following is most important if one is going to achieve high
earnings?
a.
willingness to do hard physical work.
b.
providing goods and/or services that others value highly.
c.
performing an important social function, like teaching.
d.
having a membership in a labor union.
100. Economic theory suggests that the standard of living of American workers would rise if:
a.
the minimum wage were doubled.
b.
the knowledge and skills of workers improved.
c.
older workers were forced to retire earlier, opening up jobs for younger workers.
d.
people bought only American products.
101. Assume that Burger King employees work in an air-conditioned environment while McDonalds
employees do not. Other things equal, you would expect wages to be ____ in Burger King because
____.
a.
higher; Burger King employees are more productive
b.
lower; McDonald’s employees are more productive
c.
higher; Burger King is a more prestigious place to work
d.
lower; Burger King has more favorable working conditions
102. Suppose the mean earnings of two groups differ. Which of the following would be the logical
conclusion?
a.
The group with the lowest earnings must be the victim of employment discrimination.
b.
The group with the lowest earnings must be less productive.
c.
The group with the highest earnings is more highly motivated and materialistic.
d.
Without consideration of preferences and productivity factors, differences in unadjusted
mean earnings do not necessarily reflect employment discrimination.
103. As far as contributions to a professional sports team’s bottom line are concerned, players generally
receive
a.
about what they are worth.
b.
about half of what they are worth.
c.
about twice what they are worth.
d.
about ten times more than what they are worth.
ESSAY
104. Sally and Joe recently graduated from college, both majoring in history. Joe took a prestigious job as a
legal clerk. Sally took a job as a specialist in fighting forest fires. Both received additional training
before entering their jobs. Who will likely earn a higher salary and why?
105. Given the amount of time and other costs of investing in human capital that it takes to earn a Ph.D.,
why are college professors paid less than other occupations that require similar or lesser amounts of
human capital?
106. Ethyl does not like redheads and refuses to hire any at her business. Paul was the perfect job candidate
on paper, but the personal interview revealed that he was a redhead. Are there any costs to Ethyl for
not hiring Paul?
107. In the late 1800s, Bernard made buggy whips. Their quality was such that people came from hundreds
of miles to buy the whips. As mechanized transportation developed, horse-drawn buggies largely
disappeared and so did the demand for Bernard’s whips. Would Bernard have been better off if these
new modes of transportation had never been invented?
108. Happyland is a country devoted to consumption. The inhabitants spend all of their income on
pleasurable things and virtually none on capital investment, human or otherwise. Seriousland is frugal,
spending very little on consumption and a great deal on human and physical capital. Ten years from
now, which country would you prefer to inhabit?
109. Joanne states: “The best way to increase the wages of workers is to increase worker productivity.” Is
Joanne correct? Why or why not?