Chapter 19/Earnings and Discrimination ❖ 61
48. The profit motive counteracts
a.
consumer discrimination.
b.
discrimination in sports.
c.
the beauty premium.
d.
None of the above is correct.
49. When firms focus on profit maximization, which form of wage discrimination is least likely to oc-
cur?
a.
discrimination based on race
b.
discrimination in sports
c.
consumer discrimination
d.
discrimination based on educational attainment
50. 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.
51. 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.
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 cowboys. Eddy’s Hardware denies the complaint and says the store is only
trying to maximize profit.
62 ❖ Chapter 19/Earnings and Discrimination
52. Refer to Scenario 19-3. Which of the following statements would weaken the discrimination com-
plaint against Eddy’s Hardware?
a.
Cowboys are more productive than farm boys.
b.
Cowboys work longer hours than farm boys and their effort is greater.
c.
Cowboys are generally less educated than farm boys in the field of hardware.
d.
All of the above would weaken the discrimination complaint.
53. Refer to Scenario 19-3. Which of the following statements would strengthen the discrimination
complaint against Eddy’s Hardware?
a.
Farm boys call in sick to work more often than cowboys.
b.
Cowboys are less educated than farm boys, on average.
c.
Farm boys’ experience with hardware generally exceeds cowboys’ experience with
hardware.
d.
Many cowboys take six months per year off from work to compete in a rodeo circuit and
therefore have less on-the-job experience with a hardware store.
54. 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.
55. 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.
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 that in the nonbald market.
Further assume that the market for haircuts is competitive.
Chapter 19/Earnings and Discrimination ❖ 63
56. 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.
57. 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.
58. Refer to Scenario 19-4. Competition in the market for haircuts is consistent with which of the fol-
lowing 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.
59. 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.
60. Empirical work that does not account for differences in the productivity of workers
a.
is unlikely to find evidence of wage differentials.
b.
can provide strong evidence of labor market discrimination.
c.
is likely to misinterpret apparent evidence of labor market discrimination.
d.
is accepted as superior to empirical work that does correct for differences in productivity
of workers.
64 ❖ Chapter 19/Earnings and Discrimination
61. Attributing the gender wage gap to ongoing discrimination by employers will likely be incorrect be-
cause
a.
some of the wage gap is explained by efficiency wages.
b.
differences in years of work experience likely lead to productivity differences between
men and women.
c.
compensating differentials usually lead to higher wages for women.
d.
All of the above are correct.
62. One of the problems with calculating the true amount of discrimination that takes place in the mar-
ket for labor is
a.
the inability to calculate wage differentials.
b.
the inability to see changes in the wage differentials over a period of time.
c.
the difficulty in measuring productivity differences between workers.
d.
the difficulty in measuring female labor-force participation.
Scenario 19-5
Billy works for the local piano moving company part-time after school. Billy has worked for the
company for two years but still hasn’t received a wage increase, even though newer employees have
received raises. Billy has threatened his employer with a lawsuit if he doesn’t get a raise in the next
few weeks. Billy believes he is a victim of labor-market discrimination.
63. Refer to Scenario 19-5. Which of the following statements would weaken Billy’s case against his
employer?
a.
Billy only works part-time; as a result, he has fewer hours of experience even though he
has been with the company for more years.
b.
Billy complains of lower back problems; as a result, he frequently gets the easy job of
holding the doors open while the movers carry the piano into the customer’s house.
c.
The other employees have high school diplomas, but Billy did not graduate from high
school.
d.
All of the above statements would weaken Billy’s case.
64. Refer to Scenario 19-5. Why might an economist be skeptical of Billy’s discrimination complaint?
a.
Through antitrust laws, discriminating firms can be penalized with large fees.
b.
In a competitive market, employers pay employees based on their value to the firm.
c.
Discrimination leads to profit maximization.
d.
Only cost minimizers practice discrimination.
Chapter 19/Earnings and Discrimination ❖ 65
65. Refer to Scenario 19-5. In a competitive market for piano movers, why might Billy’s wage differen-
tial persist?
a.
Billy works harder than the other employees.
b.
Billy joins a labor union.
c.
Billy’s amiable personality allows him to work well with his co-workers.
d.
Customers do not like Billy because he has a bad attitude.
66. Which of these instances would constitute labor-market discrimination? Pat receives a higher wage
than James. Pat and James are identical in all of their labor-market characteristics except that
a.
Pat is a college graduate, and James has only a high school diploma.
b.
Pat is a black , and James is white.
c.
Pat has 15 years of experience at her job, whereas James has only five years of experience.
d.
Pat is more willing to accept dangerous working conditions than James.
67. Which of these instances would constitute labor-market discrimination? Traci and Carol are identi-
cal in all of their labor-market characteristics except that Traci earns a higher salary than Carol be-
cause
a.
Traci is beautiful and Carol is not.
b.
Traci is 40 years old and Carol is 60 years old.
c.
Traci works the night shift and Carol works the day shift.
d.
Traci has 15 years of experience and Carol has 10 years of experience.
68. According to evidence provided by the U.S. government, the median black
a.
woman is paid roughly the same as the median white woman.
b.
woman is paid roughly the same as the median black man.
c.
man is paid 21 percent less than the median white man.
d.
All of the above are correct.
69. According to evidence provided by the U.S. government, the median black
a.
man earns more than the median black woman.
b.
woman earns less than the median white woman
c.
man earns less than the median white man.
d.
All of the above are correct.
66 ❖ Chapter 19/Earnings and Discrimination
70. Given that the median male is better paid than the median female, which of the following is a valid
explanation for wage differences?
a.
compensating differentials
b.
differences in human capital
c.
discrimination
d.
All of the above can be a partial explanation.
71. Which of the following can be used to help explain wage differences among different groups of
workers?
a.
human capital acquired through education
b.
human capital acquired through job experience
c.
compensating differentials
d.
All of the above can explain wage differences.
72. Which of the following can be used to help explain wage differences among different groups of
workers?
a.
human capital
b.
discrimination
c.
unions
d.
All of the above could explain wage differences among groups.
73. A consensus view among economists regarding the possibility of labor-market discrimination is that
a.
most wage differences among groups are attributable to discrimination.
b.
many employers use compensating differentials to hide discriminatory practices.
c.
wage differences among groups are not sufficient by themselves to determine how much
discrimination there is.
d.
all wage differences among groups are attributable to differences in human capital and
compensating differentials.
74. 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.
Chapter 19/Earnings and Discrimination ❖ 67
75. 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.
76. 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.
77. 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.
78. 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.
68 ❖ Chapter 19/Earnings and Discrimination
79. In discussing discrimination and the wage differences that exist between men and women and be-
tween blacks and whites, it has been said that “the disease is political even if the symptom is eco-
nomic.” 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.
80. 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.
81. 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.
82. The case study of segregated street cars in southern cities illustrates which of the following?
a.
Racial discrimination in the seating areas was an important catalyst in the Civil Rights
movement.
b.
Segregation laws were supported by local business owners as well as patrons.
c.
Firms usually care more about maximizing profits than discriminating against certain
customers.
d.
Racial discrimination was a precursor to gender discrimination.
Chapter 19/Earnings and Discrimination ❖ 69
83. In the early 20th century, streetcar seating which was segregated by race
a.
was a result of economic discrimination by railroad company managers.
b.
was less profitable than streetcar seating that didn’t have restrictions.
c.
was strongly supported by private streetcar companies.
d.
led to higher revenue and lower costs for streetcar companies.
84. In the early twentieth century, racial segregation of streetcars in the southern cities was largely op-
posed by
a.
streetcar firms.
b.
government officials.
c.
Sherman antitrust laws.
d.
consumers.
85. 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.
86. 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.
87. 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.
70 ❖ Chapter 19/Earnings and Discrimination
88. 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.
89. “The customer is always right” explains
a.
efficiency wages.
b.
compensating differentials.
c.
persistent wage discrimination based on consumer preferences.
d.
the higher wages paid to members of a union.
90. 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.
91. 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.
92. 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.
Chapter 19/Earnings and Discrimination ❖ 71
93. 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.
94. 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.
95. Studies of professional sports teams suggest that, in sports, racial discrimination is
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.
96. Regarding wage differences among various groups of workers — blacks and whites, men and
women, etc. — most economists believe that
a.
no such differences are evident from the available data.
b.
most of the differences are attributable to discrimination.
c.
some of the wage differences are attributable to discrimination, but there is disagreement
about how much.
d.
none of the differences are attributable to discrimination.
72 ❖ Chapter 19/Earnings and Discrimination
97. It is likely that, if we could measure the quality as well as the quantity of education,
a.
the human-capital argument would become less compelling as a means of explaining wage
differentials between white workers and black workers.
b.
the human-capital argument would become less compelling as a means of explaining wage
differentials between male workers and female workers.
c.
wage differentials between white workers and black workers would be more puzzling than
they are now.
d.
wage differentials between white workers and black workers would be more fully
explained.
98. Men and women tend to choose different types of occupations, and so
a.
a source of wage differences between men and women is differences in human capital.
b.
a source of wage differences between men and women is compensating differentials.
c.
the gap between the earnings of men and the earnings of women is likely even more
significant than the data alone indicate.
d.
we should expect the earnings of women to rise relative to the earnings of men, in order to
induce women to accept jobs that they have been reluctant to accept in the past.
99. Assume men, on balance, have lower amounts of human capital than women have. Then we would
expect
a.
the demand for female labor to be lower than the demand for male labor.
b.
the demand for female labor to be higher than the demand for male labor.
c.
the supply of female labor to be lower than the demand for male labor.
d.
the supply of female labor to be higher than the supply of male labor.
100. 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 discrim-
ination, 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.
Chapter 19/Earnings and Discrimination ❖ 73
101. 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.
102. 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.
103. 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 rem-
edy?
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.
104. 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.