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.
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.
b.
c.
d.
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.
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.
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.
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
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.
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.
81. If firms are competitive, then labor-market discrimination
a.
cannot exist in either the short run or the long run.
b.
will be more of a problem than if the market were monopolistic or imperfectly competitive.
c.
likely will not be a long-run problem unless customers exhibit discriminatory preferences or government
maintains discriminatory policies.
d.
likely will be more of a problem in the long run than in the short run due to the zero-profit condition that
characterizes long-run equilibrium for competitive firms.
82. “The customer is always right” explains
a.
the higher wages paid to members of a union.
b.
compensating differentials.
c.
persistent wage discrimination based on consumer preferences.
d.
All of the above are correct.
83. Discrimination may persist even in competitive markets when the source of the discrimination is
a.
employer prejudice.
b.
customer prejudice.
c.
wage prejudice.
d.
employee prejudice.
84. Which of the following explains why soccer players make millions of dollars in Europe but do not in the United
States?
a.
discriminatory rules established by the government
b.
compensating wage differentials for living in Europe
c.
discriminatory preferences on the part of US sports fans for other sports
d.
efficiency wages paid to European players to enhance on-field performance
85. Which of the following statements is not correct?
a.
If a firm discriminates by paying short workers less than tall workers, the firm may be able to compete in the
market if the firm’s customers also prefer taller workers to shorter workers.
b.
If the government passes regulations that prevent shorter workers from working in higher paying jobs, taller
workers may continue to earn higher wages than shorter workers.
c.
Government regulation that prohibits discrimination is economically necessary because market forces support
discrimination.
d.
Competitive markets will eliminate discrimination in wages over time unless customer preferences also reflect
discrimination and/or government intervention promotes discrimination.
Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald
(or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting
ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than
86. Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and barbers with hair, then
a.
all barbershops now earn a normal economic profit.
b.
competition will ensure the difference in wages will persist.
c.
barbershops that hire barbers with hair will be more profitable than those that don’t.
d.
barbershops that hire bald barbers will be more profitable than those that don’t.
87. Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and barbers with hair, then
a.
competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to
be identical.
b.
the equilibrium wage in the “bald” market will eventually fall.
c.
the equilibrium wage in the “hairy” market will eventually rise.
d.
wages in the market for barbers can never be in equilibrium.
88. Refer to Scenario 19-4. Competition in the market for haircuts is consistent with which of the following statements?
a.
Firms hiring nonbald barbers will have a cost advantage, leading to an increase in the demand for nonbald
barbers.
b.
All firms that hire only bald barbers will go out of business.
c.
Firms hiring bald barbers will enter the market, increasing the demand for bald barbers.
d.
Firms hiring nonbald barbers will enter the market, increasing the demand for nonbald barbers.
89. Refer to Scenario 19-4. If some consumers in the market for haircuts have a strong preference for having their hair
cut by a barber who is not going bald, then
a.
the difference in wages will eventually disappear since a haircut is a homogeneous good.
b.
barbershops that hire barbers with hair will be able to charge a higher price for a haircut to those consumers
who have a strong preference for barbers with hair.
c.
barbershops that hire barbers with hair will always be much more profitable.
d.
barbershops that hire bald barbers will always be much more profitable.
Scenario 19-5
Jason works part-time at a grocery store after school. Jason has worked at the store for two years but still hasn’t received a
wage increase, even though newer employees have received raises. Jason has threatened his employer with a lawsuit if he
doesn’t get a raise in the next few weeks. Jason believes he is a victim of labor-market discrimination.
90. Refer to Scenario 19-5. Which of the following statements would weaken Jason’s case against his employer?
a.
Jason only works part-time; as a result, he has fewer hours of experience even though he has been with the
company longer.
b.
Jason doesn’t accomplish as much in an hour as other workers doing the same job.
c.
Other workers that got raises moved to the night shift or agreed to work weekends.
d.
All of the above statements would weaken Jason’s case.
91. Refer to Scenario 19-5. Why might an economist be skeptical of Jason’s discrimination complaint?
a.
Through antitrust laws, discriminating firms can be penalized with large fees.
b.
Differences in wages alone do not by themself prove discrimination.
c.
Discrimination leads to profit maximization.
d.
Even if customers dislike Jason because he’s not helpful, if the store operates in a competitive market the store
will pay Jason the same as other workers.
92. Refer to Scenario 19-5. In a competitive market for grocery store employees, why might Jason’s wage differential
persist?
a.
Jason works harder than the other employees.
b.
Jason may choose to do tasks other workers find undesirable.
c.
Jason’s amiable personality allows him to work well with his co-workers.
d.
None of the above is correct.
93. In the early 20th century, streetcars in many southern cities required that white passengers sit in the front of the car
while black passengers sat in the back. The firms that ran the streetcars were
a.
in favor of the segregation laws because they lowered costs and increased profits.
b.
against the segregation laws because they increased costs and lowered profits.
c.
lobbied local governments to enact such laws because their customers were willing to pay more for service in
order to maintain the segregation.
d.
concerned about the effects of smoking. Since blacks smoked more than whites, they were supportive of the
segregation laws.
94. A 1986 study of segregation on early 20th century U.S. streetcars found that the primary source of racial segregation
on streetcars was
a.
a longstanding tradition of racial segregation.
b.
policies implemented by the owners of streetcars.
c.
laws passed by the government.
d.
threats by white people to boycott the streetcars if they were forced to sit with black people.
95. In the early twentieth century, streetcars in many southern cities were segregated by race. This racial segregation was
the result of
a.
laws that required such segregation.
b.
long-standing southern traditions about which the law was silent.
c.
streetcar firms trying to maximize profits.
d.
streetcar firms trying to minimize costs.
96. In the early 20th century, segregation of street cars made streetcar companies
a.
more profitable and was supported by private streetcar companies.
b.
more profitable but was opposed by private streetcar companies.
c.
less profitable but was supported by private streetcar companies.
d.
less profitable and was opposed by private streetcar companies.
97. In the early twentieth century, racial segregation of streetcars in the southern cities was largely opposed by
a.
streetcar firms.
b.
government officials.
c.
Federal lawyers applying the Sherman antitrust laws.
d.
consumers.
98. The example of segregated streetcars in the southern United States in the early twentieth century is one example of
a.
racial discrimination by firms, despite government efforts to halt it.
b.
racial discrimination by firms with no government action either to halt it or to support it.
c.
government-mandated racial discrimination.
d.
a failure to find any discrimination where most would expect to find it.
99. The case study of segregated street cars in southern cities illustrates which of the following?
a.
Streetcar owners opposed segregation laws primarily because they were concerned with civil rights.
b.
Segregation laws were supported by both local business owners and patrons.
c.
Firms usually care more about maximizing profits than discriminating against certain customers.
d.
Laws passed by the government cannot reduce discrimination.
100. In discussing discrimination and the wage differences that exist between men and women and between blacks and
whites, it has been said that “the disease is political even if the symptom is economic.” What does this mean?
a.
Wage differences persist because the political system has failed to enact laws to equalize wages among all
groups.
b.
Wage differences exist because of past discrimination on the part of political bodies such as city councils and
school boards.
c.
Wage differences exist because of the differences in the political views of the different groups.
d.
Wage differences exist because the political system is biased against paying compensating differentials.
101. Evidence from a study of the market for baseball players using 1960s data
a.
indicated that sports with strong player associations are unlikely to experience wage discrimination.
b.
suggested that government regulation had eliminated most evidence of wage discrimination.
c.
found some evidence of consumer-driven wage discrimination.
d.
found that measurement of marginal productivity was very difficult for baseball players.
102. Evidence from a 1988 study of the market for professional basketball players
a.
found no evidence of consumer-driven wage discrimination.
b.
found some evidence of consumer-driven wage discrimination.
c.
found that measurement of marginal productivity was very difficult for basketball players.
d.
indicated that sports with strong player associations are unlikely to experience wage discrimination.
103. A 1990 study of the market for collectable baseball cards suggested
a.
there was no evidence of price discrimination on the basis of player position (hitter versus pitcher).
b.
markets in which the product price is low are not typically characterized by consumer-driven race
discrimination.
c.
cards for white players (both hitters and pitchers) were 10 to 13 percent higher than those for comparable
black players.
d.
cards for black players (both hitters and pitchers) were 10 to 13 percent higher than those for comparable
white players.
104. Economists found evidence of discrimination in each of the following markets except
a.
1960s baseball games
b.
baseball cards
c.
live basketball games in the 1980s
d.
current era baseball games
105. Studies of professional sports teams suggest that, in sports, racial discrimination in previous decades was
a.
rare.
b.
common and that owners of teams are largely to blame.
c.
common and that customers (fans) are largely to blame.
d.
None of the above is correct; there are no reliable studies of discrimination in sports due to the difficulties
inherent in measuring athletes’ productivity.
106. Studies of discrimination in baseball suggest that black players
a.
suffered from discriminatory wage differentials several decades ago and those wage differentials persist today.
b.
suffered from discriminatory wage differentials several decades ago but those wage differentials have been
eliminated.
c.
did not suffer from discriminatory wage differentials several decades ago but in recent years wage differentials
have become evident.
d.
did not suffer from discriminatory wage differentials in the past and they do not suffer from wage differentials
today.
107. Why do economists study sports teams when looking for evidence of labor-market discrimination?
a.
because the salaries paid to professional athletes exhibit the superstar phenomenon, which is highly correlated
with discrimination
b.
because all four United States professional sports leagues (football, basketball, hockey, and baseball) require
discrimination studies every five years
c.
because nonwhites comprise a majority of starters for many professional sports teams
d.
because the wide availability of performance statistics allows economists to control for individual player
productivity in ways that are difficult to do for other types of firms
108. Which of the following statements is not correct?
a.
Competitive markets tend to limit the impact of discrimination on wages.
b.
Differences in earnings of whites and blacks or men and women provide clear evidence of discrimination.
c.
Some differences in earnings are attributable to discrimination based on race, sex, or other factors.
d.
Profit-maximizing behavior can reduce discriminatory wage differentials.
109. Which of the following factors affects the marginal productivity of a worker?
a.
human capital
b.
the worker’s disposable income
c.
compensating wage differentials
d.
discrimination based on age, race, or gender
110. As a result of their experiment economists Muriel Niederle and Lise Vesterlund found that
a.
women choose competitive environments more than men.
b.
women and men choose competitive environments equally.
c.
women choose competitive environments less than men.
d.
women are just as likely as men to have high-paying corporate jobs.
111. In the experiment conducted by economists Muriel Niederle and Lise Vesterlund
a.
men were better at adding than women.
b.
women chose the tournament payoff scheme more than men.
c.
men thought they won the four-player tournament part of the experiment more often than women thought they
won the four-player tournament.
d.
the researchers demonstrated that women face significant wage discrimination in stock brokerages.
112. The competition experiment conducted by economists Muriel Niederle and Lise Vesterlund was consistent with the
results of Terry Odean which were that
a.
men were better at math than women.
b.
men chose competition more because they were better at sports than women.
c.
men trade stocks excessively while women adopt a buy-and-hold strategy.
d.
streetcar companies were not in favor of segregation because it hurt their profits.
113. Which of the following statements is not correct?
a.
If the signaling theory of education is correct, additional schooling does not affect worker productivity but
rather signals a correlation between natural ability and education.
b.
The theory of efficiency wages suggests that firms pay higher wages to workers in order to induce workers to
be more productive.
c.
Discrimination against workers of a certain race or ethnicity is often in conflict with a firm’s desire to
maximize profits.
d.
The theory of compensating wage differentials reflects the different skills, abilities, and productivity of
workers.
114. Which of the following statements is not correct?
a.
Male workers with good looks tend to earn more than male workers with average looks
b.
If discriminating wage differentials persist in competitive markets, it is primarily because employers chose to
discriminate even in spite of customer preferences.
c.
A higher level of human capital raises a worker’s wages.
d.
In competitive markets, workers are paid a wage equal to the value of their marginal product.
115. Which of the following statements is correct?
a.
Compensating wage differentials reflect different skills of workers.
b.
Discrimination by employers affects the marginal productivity of workers.
c.
The signaling theory of education suggests that schooling does not affect worker productivity.
d.
The superstar phenomenon explains why more talented entertainers earn more than less talented entertainers.
116. Which of the following is not correct?
a.
Some economists believe that business owners who emphasize profit maximization will hire the most
productive workers regardless of the personal characteristics of the worker; hence, these firms will drive
discriminating firms out of business.
b.
Two economists found that employers in Boston and Chicago were about 50 percent more likely to interview
job applicants named Emily and Greg than those named Lakisha and Jamal.
c.
Two economists found that women were less likely to participate in an experiment where they were paid based
on math skills but more likely to participate when they were paid based on reading skills; men were more
likely to participate when they were paid based on math skills and less likely to participate when they were
paid based on reading skills.
d.
Economists found that the prices of older baseball cards were about 10 percent lower when the player was
black rather than white.
Scenario 19-6
The after-school tutoring industry is competitive, and so is the labor market for after-school tutors. Suppose male and
female tutors have equal experience and skill. Currently, some tutoring centers are biased and will only hire male tutors,
while unbiased tutoring centers desire to hire the cheapest tutors and do not care about their genders. As a result, the
equilibrium wage for male tutors is higher than that of female tutors.
117. Refer to Scenario 19-6. If consumers do not discriminate between biased and unbiased tutoring centers, then
a.
price of tutoring must increase in the short run to account for higher cost to biased tutoring centers.
b.
competition in the after-school tutoring industry will ensure the difference in wages will persist in the long
run.
c.
biased tutoring centers will be more profitable than unbiased tutoring centers in the short run.
d.
unbiased tutoring centers will be more profitable than biased tutoring centers in the short run.
118. Refer to Scenario 19-6. If consumers do not discriminate between male and female tutors, then
a.
the equilibrium wage for male and female tutors will eventually be identical.
b.
the equilibrium wage for female tutors will eventually fall.
c.
the equilibrium wage for male tutors will eventually rise.
d.
the equilibrium wage for male and female tutors will remain different, even in the long run equilibrium.
119. Refer to Scenario 19-6. Long run competition in the after-school tutoring market is consistent with which of the
following statements, assuming consumers do not discriminate between male and female tutors?
a.
Tutoring centers only hiring male tutors have lower cost, leading to an increase in the demand for male tutors.
b.
All firms that hire only male tutors will shut down because they are not able to compete.
c.
All firms that hire only female tutors will shut down because they are not able to compete.
d.
Nothing will change; All firms will continue to operate as they do now.
120. Refer to Scenario 19-6. If some families strongly prefer their children to be tutored by male tutors, then
a.
the difference in male and female tutor wages will eventually disappear.
b.
biased tutoring centers can charge more for tutoring to offset the higher cost of hiring only male tutors
c.
all unbiased tutoring centers will go out of business in the long run.
d.
all biased tutoring centers will make a profit in the short run, but will go out of business in the long run.
Scenario 19-7
Mark works full time at a large accounting firm. Mark has been at the firm for four years but has not been given a
promotion, even though newer employees have already been promoted. Mark believes he is a victim of labor-market
discrimination, and threatens to hire a lawyer to sue the company.
121. Refer to Scenario 19-7. Which of the following would weaken Mark’s case against his employer?
a.
Mark is more productive than other newly-hired accountants who were promoted before he was.
b.
Mark works more than any other accountant in the firm.
c.
Newly hired employees who were promoted before Mark had extensive previous accounting experience.
d.
Newly hired employees who were promoted before Mark are more well-liked by other accountants in the firm.
122. Refer to Scenario 19-7. Which of the following would strengthen Mark’s case against his employer?
a.
Mark is always late to important company meetings.
b.
Mark has more experience than any newly-hired accountant.
c.
Mark once got in a fight with another co-worker.
d.
The newly-hired accountants who were promoted before Mark work 20 hours a week more than Mark does.