Chapter 19/Earnings and Discrimination ❖ 41
181. Which of the following statements is not correct?
a.
Some firms pay wages that are above the equilibrium wage.
b.
Workers sometimes form labor unions to push their wages up.
c.
Wages never deviate from the balance of supply and demand in the market for labor.
d.
The federal government mandates that employers pay their workers at least as much as the
minimum wage.
182. Which of the following is not a consequence of above-equilibrium wages in a labor market?
a.
a surplus of labor
b.
unemployment
c.
more unionized jobs
d.
All of the above are consequences of above-equilibrium wages.
183. Which of the following is the most likely outcome of minimum wage laws?
a.
an increase in both the quantity of labor supplied by workers and the quantity of labor
demanded by firms
b.
an increase in the quantity of labor supplied by workers and a decrease in the quantity of
labor demanded by firms
c.
a decrease in the quantity of labor supplied by workers and an increase in the quantity of
labor demanded by firms
d.
a decrease in both the quantity of labor supplied by workers and the quantity of labor
demanded by firms
42 ❖ Chapter 19/Earnings and Discrimination
Figure 19-1
184. Refer to Figure 19-1. Some policymakers have argued that the government should establish a “liv-
ing wage.” A living wage would provide workers a reasonable standard of living in their city or re-
gion. If a living wage of $10 per hour is established in the market pictured here, we would expect
a.
employment will increase to 14 million.
b.
employment will decrease to 8 million.
c.
the wage will actually rise to $20 per hour.
d.
there will be a surplus of 14 million workers.
185. Refer to Figure 19-1. Suppose the local labor market was in equilibrium to begin with but then the
largest local employer decided to change its compensation scheme to $10 as shown. Which of the
following compensation schemes could the graph be illustrating?
a.
An efficiency wage.
b.
Discrimination.
c.
A compensating differential.
d.
The superstar phenomenon.
186. Refer to Figure 19-1. What is the loss associated with wages moving from $8 to $10?
a.
2 million jobs.
b.
6 million jobs.
c.
8 million jobs.
d.
14 million jobs.
Chapter 19/Earnings and Discrimination ❖ 43
187. Which of the following is true of minimum-wage laws?
a.
They affect skilled workers’ wages.
b.
They create above-equilibrium wages for some unskilled workers.
c.
They create a shortage of unskilled labor.
d.
They negatively affect the employment of skilled workers.
188. The idea that minimum-wage laws lead to wages that exceed equilibrium levels
a.
is a component of the theory of efficiency wages.
b.
cannot be valid unless labor unions are sufficiently powerful to force enactment of those
laws in the first place.
c.
is more applicable to unskilled-labor markets than to skilled-labor markets.
d.
All of the above are correct.
Figure 19-2
189. Refer to Figure 19-2. This figure depicts labor demand and supply in a nonunionized labor market.
The original equilibrium is at point A. If a labor union subsequently establishes a union shop and
negotiates an hourly wage of $20, then there will be an excess
a.
supply of 3,000 workers.
b.
demand of 7,000 workers.
c.
supply of 4,000 workers.
d.
supply of 7,000 workers.
44 ❖ Chapter 19/Earnings and Discrimination
190. Refer to Figure 19-2. This figure depicts labor demand and supply in a nonunionized labor market.
The original equilibrium is at point A. If a labor union subsequently establishes a union shop and
negotiates an hourly wage of $20, then the employment level
a.
increases from 6,000 to 10,000.
b.
increases from 3,000 to 10,000.
c.
decreases from 10,000 to 3,000.
d.
decreases from 6,000 to 3,000.
Figure 19-3
The manufacturing labor market.
191. Refer to Figure 19-3. Suppose the manufacturing labor market, which is non-unionized, is in equi-
librium at a wage equal to $30. Suppose now that the AFL-CIO (a labor organization) organizes the
workers in the manufacturing market and negotiates a wage of $38 per hour. Because of the union,
a.
10 people who were once employed are now unemployed.
b.
20 people who were once employed are now unemployed.
c.
40 people who were once employed are now unemployed.
d.
20 people who were once unemployed are now employed.
192. Refer to Figure 19-3. Suppose the manufacturing labor market, which is non-unionized, is in equi-
librium at a wage equal to $30. Suppose now that the AFL-CIO (a labor organization) organizes the
Chapter 19/Earnings and Discrimination ❖ 45
workers in the manufacturing market and negotiates a wage of $38 per hour. After the workers be-
come unionized, how many workers do manufacturing firms collectively hire?
a.
130 workers
b.
150 workers
c.
170 workers
d.
There is not enough information to determine the number of workers.
193. First grade teachers who work in Lynn, Massachusetts’s (a large, low income city north of Boston)
public schools earn more than first grade teachers who work in private schools in more affluent
communities north of Boston. Lynn teachers belong to a teachers’ union. Which statement best ex-
plains the scenario described above?
a.
Lynn school teachers receive a compensating differential because they work in a more
difficult environment, and they receive higher than market equilibrium wages because
they are members of a teachers’ union.
b.
Lynn school teachers receive a compensating differential because they work in a more
difficult environment, but they do not receive higher than market equilibrium wages
because they are members of a teachers’ union.
c.
Lynn school teachers do not receive a compensating differential because they work in a
more difficult environment, but they do receive higher than market equilibrium wages
because they are members of a teachers’ union.
d.
Lynn school teachers do not receive a compensating differential because they work in a
more difficult environment, and they do not receive higher than market equilibrium wages
because they are members of a teachers’ union.
194. A worker association that bargains with employers over wages and working conditions is called
a.
a strike.
b.
an oligopoly.
c.
a firm.
d.
a union.
195. The organized withdrawal of labor from a firm by a union is called
a.
a strike.
b.
a bargain.
c.
a monopoly.
d.
a tournament.
46 ❖ Chapter 19/Earnings and Discrimination
196. Studies have shown that union workers earn about
a.
10 to 20 percent more than nonunion workers in similar jobs.
b.
10 to 20 percent less than nonunion workers in similar jobs.
c.
40 to 50 percent more than nonunion workers in similar jobs.
d.
40 to 50 percent less than nonunion workers in similar jobs.
197. A union’s major source of power is its
a.
high-profile leadership.
b.
ability to increase productivity.
c.
ability to threaten a strike.
d.
ability to deny employers the opportunity to bargain over wages.
198. The market wage could be higher than the equilibrium wage if a worker
a.
is a superstar.
b.
belongs to a labor union.
c.
has more human capital.
d.
All of the above are correct.
199. Sometimes wages are set above the equilibrium level when
a.
garbage collectors earn higher wages than secretaries due to compensating differentials.
b.
accountants earn more than dental technicians due to higher educational requirements.
c.
movie superstars earn more than talented plumbers.
d.
unions negotiate higher wages by threatening to strike.
200. Which of the following is not an example of efficiency wages?
a.
More productive workers are paid more to reflect their higher output.
b.
Higher wages induce higher output from workers.
c.
Better quality applicants apply for jobs that pay above-equilibrium wages.
d.
Workers are less likely to leave jobs that pay above-equilibrium wages.
Chapter 19/Earnings and Discrimination ❖ 47
201. Which theory explains the fact that some firms may choose to pay their employees more then they
would earn as determined by equilibrium in the labor market?
a.
the theory of efficiency wages
b.
the marginal-productivity theory
c.
human-capital theory
d.
signaling theory
202. If an employer’s behavior is supportive of the theory of efficiency wages, the employer would
a.
raise wages in an effort to increase worker effort.
b.
raise wages in an effort to increase worker turnover.
c.
decrease wages in an effort to increase worker effort.
d.
decrease wages in an effort to increase worker turnover.
203. The theory of efficiency wages suggests that firms may pay above-equilibrium wages
a.
to reduce employee turnover.
b.
to prevent unions from recruiting members.
c.
to reduce the need for minimum wage laws.
d.
to increase the demand for better-skilled workers.
204. How does the theory of efficiency wages explain above-equilibrium wages?
a.
Employers are forced to pay higher wages in efficient markets.
b.
Employers give their workers a higher wage in the hope that it will lead to increased
productivity.
c.
Workers get higher wages when they prove they are increasing their productivity.
d.
Workers demand higher wages to compensate for poor fringe benefits.
205. The theory of efficiency wages asserts that
a.
unions are often successful in forcing employers to pay higher wages.
b.
employers strive to hold wages below equilibrium levels.
c.
employers may find it profitable to pay above-equilibrium wages.
d.
efficient workers actually earn lower wages than those earned by inefficient workers.
48 ❖ Chapter 19/Earnings and Discrimination
206. The theory of efficiency wages challenges the assumption that
a.
workers are efficient.
b.
workers have an incentive to shirk their responsibilities to their employers.
c.
wages must always adjust to balance labor supply and labor demand.
d.
firms sometimes choose to pay their workers above-equilibrium wages.
207. In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was signifi-
cantly higher than what any other organization offered. Henry Ford believed that this wage would
make his employees happier, increase their productivity, and lower employee turnover. Economists
would say that Mr. Ford offered his employees
a.
a union.
b.
an efficiency wage.
c.
a diminishing rate of marginal return.
d.
a leisure wage.
208. The idea of paying workers an efficiency wage is that
a.
doing so is more efficient than paying them the market wage.
b.
paying workers less gives them the incentive to work harder.
c.
workers and management gain at the expense of the stockholders of the company.
d.
workers have the incentive to work harder, thus increasing their marginal productivity.
209. Which of the following sets of circumstances is likely to provide the best evidence in support of the
theory of efficiency wages?
a.
Workers in the market are unskilled and not represented by a union, and their wage
exceeds both the equilibrium wage and the minimum wage.
b.
Workers in the market are highly skilled and not represented by a union, and their wage
exceeds the minimum wage.
c.
Workers in the market are highly skilled and represented by a union, and their wage
exceeds the equilibrium wage.
d.
Employers in the market are known for reducing the workers’ wage whenever they get an
opportunity to do so.
Chapter 19/Earnings and Discrimination ❖ 49
210. The theory of efficiency wages suggests that
a.
above-equilibrium wages increase worker productivity.
b.
workers with higher levels of education earn more than workers with lower levels of
education.
c.
workers signal their high ability to potential employers by completing formal years of
schooling.
d.
union workers earn more than nonunion workers.
211. Most wage differences can be understood while maintaining the assumption of equilibrium in the
labor market. We deviate from that assumption, however, when we consider
a.
the superstar phenomenon.
b.
the theory of efficiency wages.
c.
compensating differentials.
d.
differences in educational attainment.
212. The market wage could be higher than the equilibrium wage if a worker
a.
belongs to a labor union.
b.
is covered by a minimum-wage law.
c.
is paid an efficiency wage.
d.
All of the above are correct.
213. Bob, the manager and owner of a small company, believes in the theory of efficiency wages. As
such, Bob would be most likely to agree with which of the following quotes?
a.
“The only place where success comes before work is in the dictionary.”
b.
“Work hard. Play harder.”
c.
“Pay a man for the job you want him to do.”
d.
“Imagination is more important than knowledge.”
EARNINGS AND DISCRIMINATION
1. Which of the following is least likely to be the reason women are underrepresented in the economics
profession?
a.
labor market discrimination
b.
the choice of women to select other occupations
c.
cultural bias in primary and secondary education
d.
the inability of women to solve problems in economics
50 ❖ Chapter 19/Earnings and Discrimination
2. 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
3. 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
4. That some schools direct females away from science and math courses is evidence of
a.
labor-market discrimination
b.
discrimination that occurs prior to people entering the labor market
c.
discrimination by customers
d.
discrimination by employers
5. If an employer pays a man a higher wage than a woman, the employer
a.
is discriminating against the woman but is still maximizing profit.
b.
is not discriminating against the woman.
c.
may or may not be discriminating against the woman.
d.
is discriminating against the woman and is not maximizing profit.
6. 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.
Chapter 19/Earnings and Discrimination ❖ 51
7. Discrimination by a manager in the hiring process
a.
decreases the firm’s costs.
b.
increases the firm’s costs.
c.
is evident if a white manager refuses to hire a Hispanic worker.
d.
is evident if a 30-year-old manager refuses to hire a 50-year-old worker.
8. Two economists created fake resumes with either common African-American names such as Laki-
sha and Jamal or common white names such as Emily and Greg. After sending them to potential
employers with “Help Wanted” ads in Boston and Chicago newspapers, they found that
a.
black employees earned 50 percent less than white employees in Chicago but that blacks
and whites had similar wages in Boston.
b.
black employees earned 50 percent less than white employees in Boston but that blacks
and whites had similar wages in Chicago.
c.
job applicants with white names received 50 percent more phone calls from interested
employers.
d.
job applicants with white names received 7 percent more phone calls from interested
employers.
9. 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.
10. 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.
52 ❖ Chapter 19/Earnings and Discrimination
11. Which of the following is an example of labor-market discrimination? You may assume that worker
A and worker B have identical characteristics except for the ones listed. A firm offers a higher sal-
ary to worker A than worker B because worker A
a.
has more education.
b.
is willing to work the night shift.
c.
is a man, whereas worker B is a woman.
d.
has better performance reviews, indicating higher productivity.
12. Which of the following is an example of labor-market discrimination? You may assume that worker
A and worker B have identical characteristics except for the ones listed. A firm offers a higher sal-
ary to worker A than worker B because worker A
a.
has more experience.
b.
is willing to travel two weeks out of each month, whereas worker B will not travel more
than three nights a month.
c.
has a special certification that directly relates to her job, whereas worker B does not.
d.
is a young blonde woman, whereas worker B is an older, gray-haired man.
13. Bill and Hillary both work for the same bakery. Bill is an expert pastry chef who begins baking at 4
a.m. Hillary is a bookkeeper who works a regular 9-5 work day. Bill earns twice as much as Hil-
lary. Which of the following could explain the higher wages that Bill earns?
a.
The employer is discriminating against women.
b.
The employer is paying a compensating differential for a job that starts very early in the
morning.
c.
The employer is rewarding Bill for acquiring the human capital of a pastry chef.
d.
All of the above could be correct.
14. Bill and Hillary both work for the same bakery. Bill is an expert pastry chef who begins baking at 4
a.m. Hillary is a bookkeeper who works a regular 9-5 work day. Bill earns twice as much as Hil-
lary. Which of the statements is correct?
a.
Because the male worker earns a higher salary than the female worker, the employer must
be discriminating against women.
b.
If bookkeepers at most other bakeries earn equivalent salaries to pastry chefs, the
employer must be discriminating against women.
c.
If starting work at 4 a.m. is an unattractive characteristic of a baker job, the employer is
likely to be paying a compensating differential.
d.
All of the above could be correct.
Chapter 19/Earnings and Discrimination ❖ 53
15. Most economists believe that the higher average salaries earned by men in comparison to women
arise from
a.
discrimination.
b.
a variety of factors, including differences in human capital and compensating differentials;
few economists believe that gender discrimination in earnings exists.
c.
differences in human capital as the primary reason.
d.
a variety of factors, including differences in human capital, compensating differentials,
and discrimination.
16. Which of the following is an example of customer discrimination?
a.
A foreign government prevents women from legally working as teachers.
b.
White NBA fans prefer to attend games where the teams have more white players in the
starting lineups.
c.
Nurses who work the night shift earn more than nurses who work the day shift.
d.
All of the above could be correct.
17. 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.
18. Major league baseball players get paid more than minor league baseball players because of
a.
compensating differentials.
b.
higher levels of educational attainment.
c.
greater abilities.
d.
All of the above are correct.
54 ❖ Chapter 19/Earnings and Discrimination
19. 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.
20. Which of the following statements does not accurately describe the market for labor?
a.
The characteristics of workers, such as their education and experience, the characteristics
of jobs, such as their pleasantness or unpleasantness, and the presence or absence of
discrimination by employers all determine equilibrium wages.
b.
Labor unions, minimum wage laws, and efficiency wages all may increase wages above
their equilibrium level.
c.
Firms are willing to pay more for better-educated workers as long as there is an excess
supply of this type of worker.
d.
Discrimination by employers against a group of workers may artificially lower wages for
that group.
21. Which of the following statements is not correct?
a.
It is possible that additional education will increase a worker’s wage without increasing the
worker’s productivity.
b.
If discriminating wage differentials persist in competitive markets, it is primarily because
either consumers are willing to pay to maintain the discrimination or because government
mandates it.
c.
An efficiency wage corresponds to a lower wage that a nondiscriminating employer pays
to a worker because a discriminating employer won’t hire her.
d.
In competitive markets, workers are paid a wage equal to the value of their marginal
product.
Chapter 19/Earnings and Discrimination ❖ 55
22. Which of the following factors does not affect the value of a worker’s marginal product?
a.
discrimination against a particular group of workers by a firm’s customers
b.
a worker’s level of disposable income
c.
a worker’s level of human capital
d.
compensating wage differentials
23. 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.
24. Jane and John are twins who attended grammar school through college together. Jane and John both
got jobs at a brokerage firm after graduating from college with the same major. They both work
equally hard. Jane earns $43,000 a year, and John earns $69,000 a year. Select the best explanation
for this wage difference.
a.
Jane has less human capital than John.
b.
Jane has more human capital than John.
c.
John has been discriminated against because he is male.
d.
Jane has been discriminated against because she is female.
25. Joan is a white 23-year-old female, and Marcia is a black 23-year-old female. Both Joan and Marica
are economics majors, and they graduated from the same college in the same year with the same
GPA. Joan and Marcia both got jobs at a brokerage firm after graduating from college. They both
work equally hard. Joan earns $38,000 a year, and Marcia earns $30,000 a year. Select the best ex-
planation for this wage difference.
a.
Joan has less human capital than Marcia.
b.
Joan receives a compensating wage differential that Marcia does not.
c.
Joan has been discriminated against because she is white.
d.
Marcia has been discriminated against because she is black.
26. John is an Asian 23-year-old male, and Ken is an Asian 43-year-old male. Both John and Ken are
economics majors, and they graduated from the same college with the same GPA — John in 2006
56 ❖ Chapter 19/Earnings and Discrimination
and Ken in 1986. John and Ken are both financial advisers at the same brokerage firm. John earns
$52,000 a year, and Ken earns $88,000 a year. Select the best explanation for this wage difference.
a.
John has more human capital than Ken.
b.
John has less human capital than Ken.
c.
John has been discriminated against because he is young.
d.
Ken has been discriminated against because he is old.
27. Karen is a black 21-year-old female, and Jessica is a black 41-year-old female. Both Karen and Jes-
sica are accounting majors, and they graduated from the same college with the same GPA — Karen
in 2008 and Jessica in 1988. Karen and Jessica are both financial advisers at the same mutual fund
firm. Karen earns $45,000 a year, and Jessica earns $90,000 a year. Select the best explanation for
this wage difference.
a.
Karen has more human capital than Jessica.
b.
Karen has less human capital than Jessica.
c.
Karen has been discriminated against because she is young.
d.
Jessica has been discriminated against because she is old.
28. If men, on average, earn 20 percent more than women in a particular occupation,
a.
this is clear evidence of discrimination.
b.
some of this differential could be due to differences in educational levels.
c.
some of this differential could be due to differences in human capital.
d.
Both b and c are correct.
29. Politicians often point to wage differentials as evidence of labor market discrimination against eth-
nic minorities and women. Economists, however, argue against this approach because
a.
they don’t believe the wage differential really exists.
b.
they can’t agree on a definition of the term “discrimination.”
c.
they believe compensating differentials account for all wage differences.
d.
different people may have different wages for reasons unrelated to discrimination.
30. Economists are skeptical that discrimination is employer driven because
a.
discrimination cannot exist in markets.
b.
employers are not really interested in maximizing profit.
c.
employers typically base wages paid on the prevailing market wage.
d.
holding productivity constant, a profit-maximizing employer will hire the cheapest labor
available.
Chapter 19/Earnings and Discrimination ❖ 57
31. Why would a wage differential due to discrimination be unlikely to persist in a competitive labor
market?
a.
There is a cost advantage for firms that do not discriminate.
b.
Workers who are victims of discrimination will eventually drop out of the labor market.
c.
Competing firms will hire fewer of the workers who are temporarily victimized by
discrimination.
d.
Discrimination cannot exist in markets.
32. Which of the following represents an example of labor-market discrimination?
a.
An employer is more likely to grant an interview to a person graduating from Yale than
from the local community college.
b.
An employer is more likely to grant an interview to a person graduating from the local
community college than from Yale.
c.
An employer is more likely to grant an interview to a woman with a traditionally “white”
name such as Emily than to a woman with a traditionally “black” name such as Lakisha.
d.
An employer is as likely to grant an interview to person with a traditionally “masculine”
name such as “Alex” as a person with a traditionally “feminine” name such as “Emily.”
33. 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.
34. Labor-market discrimination is evident when
a.
wages of individuals differ on the basis of some recognizable attribute that is unrelated to
productivity.
b.
wage rates differ for similar jobs.
c.
consumers prefer to shop at some stores, and not at others.
d.
wages reflect workers’ human capital.
58 ❖ Chapter 19/Earnings and Discrimination
35. Discrimination occurs when the marketplace offers different opportunities to similar individuals
who differ only by
a.
race.
b.
level of education.
c.
attitudes toward risk.
d.
attitude toward the tradeoff between labor and leisure.
36. Discrimination occurs when the marketplace offers different opportunities to similar individuals
who differ only by
a.
age.
b.
years of experience.
c.
years of education.
d.
All of the above are forms of discrimination.
37. By definition, there is discrimination when the marketplace offers different opportunities to similar
individuals who differ only by
a.
race, ethnic group, sex, age, or other personal characteristics.
b.
qualifications, experience, or job preferences.
c.
the levels of human capital.
d.
All of the above are correct.
38. Offering different opportunities to similar individuals who differ only by race, ethnic group, sex,
age, or other personal characteristics is called
a.
a compensating differential.
b.
an efficiency wage.
c.
discrimination.
d.
compensating variation.
Chapter 19/Earnings and Discrimination ❖ 59
39. Which of the following is an example of discrimination in the labor market?
a.
Women earn less than men because women are more likely to be employed in occupations
that pay less, such as elementary school teachers rather than electrical engineers.
b.
Women earn less than men because women have, on average, fewer years of experience in
the labor force because women, on average, periodically leave the labor force to raise
children.
c.
A pharmaceutical sales company pays women less than men because the company’s
customers, physicians and pharmacists, say that they prefer to deal with men rather than
women.
d.
All of the above are examples of discrimination.
40. Which of the following statements is correct?
a.
Differences in human capital may explain differences in wages between blacks and whites.
b.
Racial discrimination is the strongest explanation for differences in wages between blacks
and whites.
c.
Gender discrimination is the strongest explanation for differences in wages between blacks
and whites.
d.
None of the above statements is correct.
41. Suppose that an employer can hire workers with brown hair and workers with blonde hair. Each type
of worker has the same productivity. Which of the following is correct if the employer discriminates
by hiring only workers with brown hair?
a.
The employer will be just as efficient as a nondiscriminating employer.
b.
The employer will face higher costs than firms that focus only on maximizing profits.
c.
The employer will immediately go out of business because discrimination is illegal.
d.
The employer will face union strikes.
42. Evidence of differences in average wages of women compared to men
a.
clearly illustrates differences in productivity between genders.
b.
provides conclusive evidence of discrimination on the basis of gender.
c.
is seldom used to provide evidence of discriminatory bias.
d.
does not provide conclusive evidence of discrimination.
60 ❖ Chapter 19/Earnings and Discrimination
43. Evidence of differences in average wages of black workers compared to white workers
a.
does not alone provide conclusive evidence of discrimination.
b.
clearly indicates differences in productivity between races.
c.
is seldom used to provide evidence of discriminatory bias.
d.
clearly indicates discrimination on the basis of race.
44. Evidence of discrimination in labor markets
a.
applies only to race and gender.
b.
is conclusively identified in large differences in average wages rates between men and
women.
c.
is difficult to verify by reference to differences in average wage rates.
d.
is more easily identified on the basis of race than gender.
45. Differences in human capital are likely to
a.
be unrelated to wage rate differences across gender classifications, since both men and
women are required to complete requirements for a high school diploma.
b.
be most helpful in explaining age discrimination, but unhelpful in explaining race
discrimination.
c.
explain some of the differences in average wage rates across age classifications.
d.
explain all of the differences in average wage rates across gender classifications.
46. Economists generally agree that
a.
human capital theory provides the best explanation of discriminatory practices.
b.
differences in average wages do not by themselves provide conclusive evidence about the
magnitude of discrimination in labor markets.
c.
discrimination is exclusively an economic, rather than political, phenomenon.
d.
most of the wage differentials observed in the U.S. economy are due to discrimination.
47. 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.