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Chapter 19 Earnings and Discrimination
MULTIPLE CHOICE
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.
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. Hapland and Genoshia have just started to trade with each other. Hapland exports goods produced
with skilled labor and imports goods made with unskilled labor from Genoshia. Over time, we
would expect that the wages of skilled labor in Hapland will
a.
rise, and the wages of unskilled labor in Hapland will fall.
b.
fall, and the wages of unskilled labor in Hapland will rise.
c.
rise, and the wages of unskilled labor in Hapland will rise.
d.
fall, and the wages of unskilled labor in Hapland will fall.
5. The characteristics of jobs and workers affect
a.
labor supply.
b.
labor demand.
c.
equilibrium wages.
d.
All of the above are correct.
2 ❖ Chapter 19/Earnings and Discrimination
6. 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.
7. A compensating differential is
a.
a difference in pay due to nonmonetary characteristics of jobs.
b.
an 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.
equivalent to a union wage.
8. Working in a slaughterhouse is much riskier and more unpleasant than working in a bookstore. 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.
9. 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.
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 distinguishable on the basis of monetary characteristics.
d.
a wage difference that arises from nonmonetary characteristics of different jobs.
Chapter 19/Earnings and Discrimination ❖ 3
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. 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.
13. 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.
14. 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 posi-
tions, 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.
4 ❖ Chapter 19/Earnings and Discrimination
15. 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.
16. 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.
17. 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. This
difference in pay is referred to as a
a.
discriminatory wage practice.
b.
compensating differential.
c.
wage inequity.
d.
a market inefficiency.
18. 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.
19. The statement that "night shift workers make a higher wage than day shift workers" is likely to re-
flect 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.
Chapter 19/Earnings and Discrimination ❖ 5
20. Wage differences that can't be explained by the number of years of training could result from
a.
demand but not supply.
b.
supply but not demand.
c.
compensating differentials.
d.
the marginal product of capital.
21. If a worker is indifferent between a job with a wage of $12 per hour and a job with a wage of $15
per hour, then the
a.
higher-paying job has a compensating wage differential of $3 per hour.
b.
higher-paying job has a compensating wage differential of $15 per hour.
c.
higher-paying job is intrinsically more attractive than the lower-paying job.
d.
worker's preferences are not rational.
22. Traci and Ken both work at the local factory producing tractors. Traci earns $20 per hour working
the day shift, and Ken earns $22 per hour working the night shift. Traci and Ken 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 $2 per hour.
b.
higher-paying job has a compensating wage differential of $22 per hour.
c.
higher-paying job is intrinsically more attractive than the lower-paying job.
d.
factory is discriminating against Traci because she is a woman.
23. 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.
24. 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.
6 ❖ Chapter 19/Earnings and Discrimination
25. 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.
26. 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.
27. 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."
28. 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.
Beth's wage is higher than Bill's because Beth is very personable, and Bill is very gruff.
c.
Karl's wage is higher than Kay's because Karl's job may cause long-term health problems,
and Kay's job will not impair her health.
d.
All of the above are good illustrations of compensating differentials.
29. Public school teachers are known to have low wages. Which of the following would push the teach-
ers’ 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.
Chapter 19/Earnings and Discrimination ❖ 7
30. 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.
31. 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.
32. 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.
33. Assuming that all other things are equal, including the wage, which of the following statements is
correct?
a.
The quantity of labor supplied for easy jobs exceeds that for difficult jobs.
b.
The quantity of labor supplied for fun jobs exceeds that for dull jobs.
c.
The quantity of labor supplied for safe jobs exceeds that for dangerous jobs.
d.
All of the above are correct.
34. Which term do economists use to refer to a difference in wages that arises from nonmonetary char-
acteristics of different jobs?
a.
non-pecuniary differentials
b.
compensating differentials
c.
fundamental differences
d.
idiosyncratic differences
8 ❖ Chapter 19/Earnings and Discrimination
35. Jobs that involve pleasant work, as opposed to jobs that involve unpleasant work, usually pay
a.
higher wages, because jobs that involve pleasant work typically require more education
than do jobs that involve unpleasant work.
b.
higher wages, because jobs that involve pleasant work typically require more well-
developed personality skills than do jobs that involve unpleasant work.
c.
lower wages, because workers typically are not attracted to jobs that involve unpleasant
work unless there is a monetary inducement.
d.
lower wages, because workers who take jobs that involve unpleasant work typically stay
in those jobs for relatively long periods of time and accumulate significant experience.
36. Who among the following individuals most likely experiences the largest nonmonetary reward as a
supplier of labor? Assume all of the four individuals have the same level of education and work the
same number of hours per week.
a.
Albert, who prefers to be around other people but who works at home by himself
b.
Amy, whose job provides little intellectual and personal satisfaction
c.
Antoinette, whose preference is to avoid dangerous work but works as a firefighter
d.
Arnold, who works the night shift and prefers to work at night and sleep during the day
37. Callie has just graduated from Hairs-R-Us Beauty School with a license to cut hair. She can earn
$15 an hour styling hair at the local hair salon or $20 an hour styling hair at the local funeral home.
The higher wage offered by the funeral home is an example of
a.
a human capital differential.
b.
a compensating differential.
c.
signaling theory.
d.
the superstar phenomenon.
38. Cory has just graduated from veterinary school. He can earn $40,000 working at a small animal
clinic or $50,000 working with farm animals and horses where the risks of getting injured by an ani-
mal are higher. The higher salary to work with larger animals is an example of
a.
a compensating differential.
b.
signaling theory.
c.
an efficiency wage.
d.
efficient union bargaining.
Chapter 19/Earnings and Discrimination ❖ 9
39. Which of the following is an example of a compensating differential?
a.
Two workers with different undergraduate majors earn different salaries.
b.
Two workers with different years of experience earn different salaries.
c.
Two workers whose jobs entail different working conditions earn different salaries.
d.
Two workers with different levels of personal attractiveness earn different salaries.
40. Which of the following is an example of a compensating differential?
a.
Two workers with different levels of on-the-job training earn different salaries.
b.
Two workers whose jobs entail different working conditions earn different salaries.
c.
Two workers whose jobs require different levels of technical expertise earn different
salaries.
d.
Two workers with different levels of natural ability earn different salaries.
41. Which of the following is not an example of a compensating differential? Job A pays more than Job
B because Job A requires
a.
more international travel to dangerous locations.
b.
two night shifts per month.
c.
careful handling of toxic chemicals.
d.
an advanced degree.
42. Job A is easy, fun, and safe. Job B is hard, dull, and dangerous. All else equal, we would expect
Job A to pay
a.
higher wages than Job B because the labor supplied for Job B will be greater.
b.
lower wages than Job B because the labor supplied for Job B will be greater.
c.
higher wages than Job B because the labor supplied for Job A will be greater.
d.
lower wages than Job B because the labor supplied for Job A will be greater.
43. A compensating differential refers to differences in
a.
human capital levels of workers.
b.
signaling differences of workers.
c.
nonmonetary characteristics of jobs.
d.
All of the above are correct.
10 ❖ Chapter 19/Earnings and Discrimination
44. Which of the following is an example of a compensating differential?
a.
paying workers with more years of experience higher wages than workers with fewer
years of experience, all else equal
b.
paying workers who work on the night shift higher wages than workers who work the day
shift, all else equal
c.
paying accountants who have passed the Certified Public Accountant exam higher wages
than accountants who have not passed it, all else equal
d.
paying workers with PhDs higher wages than workers with BAs, all else equal
45. Which of the following is not an example of a compensating differential?
a.
paying workers who do dull, boring work higher wages than workers who do fun,
interesting work, all else equal
b.
paying workers who work on the night shift higher wages than workers who work the day
shift, all else equal
c.
paying workers who do more dangerous work higher wages than workers who do less
dangerous work, all else equal
d.
paying workers with PhDs higher wages than workers with BAs, all else equal
46. Store clerks are known to have low wages. This is likely to reflect the fact that
a.
store clerk jobs are perceived to be relatively easy, thus attracting low-skill workers.
b.
store clerk jobs are perceived to be relatively difficult, thus attracting high-skill workers.
c.
many people perceive the job of store clerk as having significant risk of death on the job.
d.
store clerks are required to have a college degree.
Scenario 19-1
Ferris B., a student at a community college, is considering what he should do for summer
employment. Two recruiters show up at his school in search of summer workers. Recruiter A is
looking for lifeguards to patrol the beach at an exclusive island resort in the Caribbean. Recruiter B
is looking for workers to staff positions at a summer youth camp.
47. Refer to Scenario 19-1. Ferris is carefully considering the options that each recruiter presents. On
the basis of knowledge obtained in his economics class, Ferris concludes that
a.
wages are unlikely to be affected by job requirements.
b.
since the lifeguard job would expose him to a threat of skin cancer, the wage will be low.
c.
if the lifeguard job has a requirement for special training or certification, the wage offer
will be higher than otherwise.
d.
if the lifeguard job also requires a willingness to clean public restrooms, the wage offer
will be lower than otherwise.
Chapter 19/Earnings and Discrimination ❖ 11
48. Refer to Scenario 19-1. Ferris is carefully considering the options that each recruiter presents. On
the basis of knowledge obtained in his economics class, Ferris concludes that
a.
the lifeguard job will be more fun than the summer camp job, so the wage for that job will
be higher than otherwise.
b.
if the summer camp job doesn't require any special skills, the wage for that job will be
lower than otherwise.
c.
since the summer camp job requires some night shift work, the wage for that job will be
lower than otherwise.
d.
All of the above are correct.
49. Adam and Bob are identical twins who attended grammar school through high school together.
Adam got a job after high school, and Bob got a job after graduating from college. Adam earns
$36,000 a year, and Bob earns $69,000 a year. Select the best explanation for this wage difference.
a.
Adam has less human capital than Bob.
b.
Bob has less human capital than Adam.
c.
Adam has received a compensating differential
d.
Adam is a member of a union.
Scenario 19-2
Travis, a student at a community college, is considering what he should do for summer employment.
Two recruiters show up at his school in search of summer workers. Recruiter A is looking for
workers to help a disaster relief agency distribute food aid in Africa. Recruiter B is looking for
custodial help to clean motel rooms in a motel located near the entrance to a famous national park.
50. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents. On
the basis of knowledge obtained in his economics class, Travis concludes that
a.
if the job in Africa has a lot of job satisfaction, the wage will be higher.
b.
if the job in Africa has a lot of job satisfaction, the wage will be lower.
c.
if the job cleaning motel rooms is miserable work, the wage will be lower.
d.
if the job cleaning motel rooms is not miserable work, the wage will be higher.
51. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents. On
the basis of knowledge obtained in his economics class, Travis concludes that
a.
if the motel job also requires an ability to do general plumbing repairs, the wage offer will
be higher than otherwise.
b.
if the food distribution job has a requirement for special training or certification, the wage
offer will be lower than otherwise.
c.
if the food distribution job exposes him to the Ebola virus, the wage will be lower.
d.
if the motel job involves substantial amounts of driving for supplies, the wage offer will be
lower than otherwise.
12 ❖ Chapter 19/Earnings and Discrimination
52. Refer to Scenario 19-2. Travis is carefully considering the options that each recruiter presents. On
the basis of knowledge obtained in his economics class, Travis concludes that
a.
if the motel job requires some night shift work, wages will be lower than otherwise.
b.
the job that is more fun will have a higher wage.
c.
if the motel job doesn't require any special skills, the wage offer will be lower than
otherwise.
d.
All of the above are correct.
53. A difference in wages between a highly-educated worker and a less-educated worker
a.
may be due to a difference in the amounts of human capital between the workers..
b.
may be a signal that the market is indifferent to a worker's level of human capital.
c.
is considered unfair by economists.
d.
is considered unfair by everyone.
54. Coal mining is a dangerous and dirty job. Suppose someone developed new machinery that made
coal mining safer and cleaner; at the same time, suppose it made coal miners more productive. We
would expect that the wages of coal miners would
a.
rise.
b.
fall.
c.
stay exactly the same.
d.
rise, fall, or stay the same.
55. The accumulation of investments in people, such as education and on-the-job training, is known as
a.
physical capital.
b.
human capital.
c.
efficiency wage.
d.
a union.
56. Which of the following would not be considered human capital?
a.
the training a chef receives in cooking school
b.
the time a chef spends preparing meals in a restaurant practicing his trade
c.
the financial capital a chef uses to start his own restaurant
d.
the skills a chef learns when attending a class about cake decorating
Chapter 19/Earnings and Discrimination ❖ 13
57. Which of the following would not be considered human capital?
a.
the golf clubs a professional golfer uses to play golf
b.
the golf balls a professional golfer uses to play golf
c.
the device a golfer uses to accurately measure distances on a golf course
d.
none of the above would be considered human capital
58. Which of the following would be considered human capital?
a.
the financial capital a person earns over a lifetime of investing
b.
the machinery a worker uses to produce a product
c.
the training a worker receives when starting a new job
d.
the break room in a factory where employees go to have coffee
59. Which of the following is an example of human capital?
a.
Machines built by people.
b.
Formal education acquired in schools.
c.
On-the-job training.
d.
Both b and c are correct.
60. Human capital is
a.
an important determinant of wages, but it does not affect the production of goods and
services.
b.
an important determinant of wages, and it affects the production of goods and services.
c.
a specific type of physical capital made by humans rather than machines.
d.
very different from physical capital in that physical capital represents an investment, while
human capital does not represent an investment.
61. In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typi-
cal high school graduate without additional education has
a.
risen as the demand for skilled labor has increased relative to the demand for unskilled
labor.
b.
risen as the demand for skilled labor has decreased relative to the demand for unskilled
labor.
c.
fallen as the demand for skilled labor has increased relative to the demand for unskilled
labor.
d.
fallen as the demand for skilled labor has decreased relative to the demand for unskilled
labor.
14 ❖ Chapter 19/Earnings and Discrimination
62. Between 1980 and 2008, the wage gap between men with a high school education and men with a
college education has increased. In particular, in 2008 men with a college degree earned about
a.
10% more than men with a high school education.
b.
25% more than men with a high school education.
c.
63% more than men with a high school education.
d.
88% more than men with a high school education.
63. Between 1980 and 2008, the wage gap between women with a high school education and women
with a college education has increased. In particular, in 2008 women with a college degree earned
about
a.
12% more than women with a high school education.
b.
26% more than women with a high school education.
c.
42% more than women with a high school education.
d.
71% more than women with a high school education.
64. The time spent by students in college
a.
leads to lower lifetime earnings because opportunity costs are high.
b.
is an investment in human capital.
c.
decreases human capital by lowering work experience.
d.
increases as the wages paid to low-skilled workers rise.
65. Jill is the best eye surgeon in town, and she earns $350,000 a year. Susan is an average eye surgeon
in town, and she earns $100,000 a year. Jill's skills as a surgeon
a.
are valued more by the market relative to Susan's and that explains why her income is
higher than Susan's.
b.
are valued less by the market relative to Susan's and that explains why her income is
higher than Susan's.
c.
are valued less by the market relative to Susan's and that explains why her income is lower
than Susan's.
d.
are more expensive because she receives a compensating differential.
Chapter 19/Earnings and Discrimination ❖ 15
66. Philip is an average contractor in town, and he earns $40,000 a year. Billy is the best contractor in
town, and he earns $480,000 a year. Philip's contracting services
a.
are valued more by the market relative to Billy's and that explains why his income is
higher than Billy's.
b.
are valued less by the market relative to Billy's and that explains why his income is higher
than Billy's.
c.
are valued less by the market relative to Billy's and that explains why his income is lower
than Billy's.
d.
are more expensive because he receives a compensating differential.
67. In general, the higher a person's education level,
a.
the higher the person's earnings.
b.
the more physically attractive the person is likely to be.
c.
the more socially outgoing the person is likely to be.
d.
All of the above are correct.
68. The belief that education makes a person more productive and thereby raises his or her wage is re-
ferred to as the
a.
compensating-differential view of education.
b.
natural-ability view of education.
c.
unmeasured-variables view of education.
d.
human-capital view of education.
69. Which of the following is the most important contributor to human capital?
a.
education
b.
effort
c.
chance
d.
physical strength
70. A recent law school graduate is considering two offers to practice law, one in California and one in
Alabama. The California bar exam is very difficult to pass compared with Alabama’s exam. Assum-
ing all other things equal, the attorney would expect
a.
to be unable to predict the wage difference between Alabama and California.
b.
to make a higher wage in California.
c.
to make a higher wage in Alabama.
d.
wages in California and Alabama to be identical.
16 ❖ Chapter 19/Earnings and Discrimination
71. Which of the following would be considered an investment in human capital?
a.
education
b.
a teacher's blackboard
c.
the purchase of a new computer to enhance labor productivity
d.
All of the above are correct.
72. Expenditures on human capital
a.
reflect an expectation of some future return on the investment.
b.
are generally embodied in a specific individual.
c.
reflect an investment of resources today to raise productivity in the future.
d.
All of the above are correct.
73. The ownership of human capital
a.
is typically embodied in related physical capital.
b.
may be subject to government restrictions on transferability.
c.
is not easily transferable.
d.
All of the above are correct.
74. The return to investment in human capital is observed
a.
only when workers are assigned identical tasks.
b.
in the wage differential between workers.
c.
in the high school dropout rate in inner-city urban school districts.
d.
in the low wages of educated factory workers.
75. People are willing to invest in human capital because
a.
the demand for skilled labor is higher than for unskilled labor.
b.
it increases the marginal product of their labor.
c.
firms are willing to pay more for more productive workers.
d.
All of the above are correct.
Chapter 19/Earnings and Discrimination ❖ 17
76. A prestigious private high school requires each of its teachers to have a Ph.D. in the subject they
teach. This requirement is likely to
a.
increase the supply of teachers to this school.
b.
increase wages for teachers at the private school relative to those at public schools.
c.
decrease the marginal product of teachers at the private school.
d.
All of the above are correct.
77. When an employer pays the cost of educating a worker, it is likely that the employer
a.
is demonstrating altruistic motives.
b.
is pursuing some objective other than profit-maximization.
c.
hopes to recapture his investment in the form of increased labor productivity.
d.
receives reimbursement from the government for the cost of the education.
78. The wage difference between jobs that require education and those that don't
a.
is not likely to be related to productivity differences.
b.
is a barrier to obtaining an education.
c.
does not affect the supply of workers in the different labor markets.
d.
encourages workers to bear the cost of acquiring education.
79. The Asian Development Bank has been investing in education and training programs in the develop-
ing economies of Asia over the last five years. As a result of this investment, economists who adhere
to the human capital view of education would predict
a.
rising wages as labor productivity is enhanced.
b.
falling wages as the labor market is saturated with too many educated workers.
c.
the marginal productivity of capital would not be affected.
d.
the marginal productivity of labor would not be affected.
80. The difference in wages paid to major-league baseball players and minor-league baseball players is
most likely due to
a.
chance.
b.
natural ability.
c.
the fact that the players' union is strong.
d.
a compensating differential.
18 ❖ Chapter 19/Earnings and Discrimination
81. A compensation scheme that pays salespeople a percentage of the sales they make is attempting to
reward
a.
work effort.
b.
loyalty to the firm.
c.
years of schooling.
d.
years of experience.
82. Workers whose skills become obsolete as a result of technological change are often paid a lower
wage as a result of
a.
natural ability.
b.
geographic location of employment.
c.
chance.
d.
work effort.
83. Economists who study labor markets have discovered that
a.
only about 5 percent of wage differences are related to chance.
b.
ability is not difficult to measure but is largely insignificant in explaining wage
differences.
c.
work effort is difficult to measure but is not likely to contribute much to an explanation of
wage differences.
d.
ability, effort, and chance are likely to be significant contributors to wage differences.
84. In empirical analyses of factors that help explain wages,
a.
effort and ability are not likely to contribute to large differences in wages in the U.S.
economy.
b.
economists typically find that measurable factors explain less than half of the variation in
wages.
c.
economists typically find few factors that are not explicitly measurable.
d.
unmeasurable influences on wage differences are found to be quite small.
85. Which of the following statements is true of wages, educational attainment, and gender?
a.
Male workers are compensated for attending college, while female workers generally are
not.
b.
Female workers are compensated for attending college, while male workers generally are
not.
c.
Both genders receive a higher wage for attending college.
d.
Neither gender receives a higher wage for attending college.
Chapter 19/Earnings and Discrimination ❖ 19
86. Why do major-league baseball players get paid more than minor-league players?
a.
Major-league players are better athletes.
b.
The higher wage reflects a compensating differential.
c.
Playing in the major leagues in more pleasant then playing in the minor leagues.
d.
The higher wage is often due to educational discrepancies.
87. Nick and Daryn are both market analysts who started working for their current employer during the
same year, graduated from the same university with bachelors’ degrees in economics, and achieved
similar performance reviews. Nick earned a master’s degree last year. If Nick earns a higher annual
salary than Daryn because he has more formal education, the employer is
a.
paying a compensating differential.
b.
paying efficiency wages.
c.
practicing discrimination.
d.
rewarding increases in human capital.
88. Nick and Daryn are both market analysts who graduated from the same university with bachelors’
degrees in economics and achieved similar performance reviews. Daryn has one year more experi-
ence in his current position than does Nick. If Daryn earns a higher annual salary than Nick because
he has an additional year of tenure, the employer is
a.
paying a compensating differential.
b.
rewarding increases in human capital.
c.
practicing discrimination.
d.
paying efficiency wages.
89. Which of the following is not an example of human capital for a college economics professor?
a.
years of experience
b.
a doctorate in economics
c.
chalk
d.
seminar courses the professor attends on effective teaching methods
90. Which of the following is an example of human capital for a college economics professor?
a.
years of experience
b.
“clickers” which interface with an in-class computer system and display the results of
student “votes”
c.
chalk
d.
internet access in the classroom
20 ❖ Chapter 19/Earnings and Discrimination
91. Human capital is
a.
a stock of equipment and structures.
b.
the result of investments workers make in themselves such as on-the-job training.
c.
a difference in wages that arises to offset the nonmonetary characteristics of different jobs.
d.
inversely related to the supply of workers.
92. Human capital is
a.
a stock of equipment and structures.
b.
the result of investments workers make in themselves such as education.
c.
a difference in wages that arises to offset the nonmonetary characteristics of different jobs.
d.
a characteristic that affects a worker’s self-esteem but not her wages.
93. If unskilled labor is relatively plentiful and cheap in many foreign countries, then as the United
States expands its trade with these foreign countries, the domestic demand for
a.
both skilled and unskilled labor will rise proportionately.
b.
skilled labor will fall and the demand for unskilled labor will rise.
c.
skilled labor will rise and the demand for unskilled labor will fall.
d.
both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.
94. In recent years, the amount of international trade in which the United States engages has
a.
increased, altering the demand for skilled and unskilled labor.
b.
decreased a little, altering the demand for skilled and unskilled labor.
c.
decreased substantially, altering the demand for skilled and unskilled labor.
d.
remained fairly constant; thus, the demand for skilled and unskilled labor is unchanged.
95. In recent years, the amount of international trade in which the United States engages has increased.
Which of the following accurately describes the effect(s) on labor demanded by firms in the United
States?
a.
The demand for both skilled and unskilled labor has increased.
b.
The demand for both skilled and unskilled labor has decreased.
c.
The demand for skilled labor relative to unskilled labor has risen.
d.
The demand for unskilled labor relative to skilled labor has risen.
