Chapter 19 Mankiw/Taylor, Economics

Name:

True/False
Indicate whether the sentence or statement is true or false.

A compensating differential is the difference in wages paid to workers who are
discriminated against and those who are not discriminated against.

Workers on the night shift receive a compensating differential to offset the disagreeable nature of working at night.

In the last 25 years in the UK, the gap between the wages of university graduates and non-graduates has been closing.

Firms are willing to pay more for workers with greater human capital because workers with greater human capital have a greater value of marginal product.

Human capital is increased by education and on-the-job training.

An apprentice will work for a relatively low wage because some of the apprentice's pay is in terms of on-the-job training.

Some superstars can earn astronomical salaries because, in some markets, everyone wants the good supplied by the best producer and technology has made it possible for the best producer to satisfy every customer at low cost.

If the signalling view of education is true, a policy of increasing the education of workers will increase the wages of all workers.

The evidence that attractive people are paid more than unattractive people clearly demonstrates that the labour market discriminates against unattractive people.

10.

Ability, effort, and chance must play an important role in wage determination since less than half of the variation in wages can be explained by workers' education, experience, age, and job characteristics.

11.

If a company in a competitive market persistently pays a discriminatory wage to a certain group, it must be because the employer is a bigot.

12.

If there is a difference in wages among groups, it is evidence that there is discrimination in the labour market.

13.

If it were not for minimum wage laws, workers would always be paid the equilibrium wage.

14.

Competition will tend to eliminate discrimination in the labour market if customers are not bigoted and if government does not require discrimination.

15.

At least some of the difference in pay between men and women can be explained by the fact that, on average, men have attained more and better schooling, men have more job experience, and men may do more unpleasant jobs.

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

16.

If a person who works in a coal mine gets paid more than a person with a similar background and skills who works in a safer job, then

a.	coal miners must have greater human capital than others.
b.	we have observed a compensating differential.
c.	coal miners must be more attractive than other workers.
d.	we have evidence of discrimination against workers outside the coal mine.

17.

According to the human capital view of education, education

a.	has no impact on the human capital of workers.
b.	increases human capital and the wages of workers.
c.	can make any worker into a superstar.
d.	only helps firms sort workers into high-ability and low-ability workers.

18.

Which of the following is not part of a worker's human capital?

a.	education
b.	experience
c.	All of these answers are parts of a worker's human capital.
d.	effort
e.	on-the-job training

19.

According to the signalling view of education, education

a.	can make any worker into a superstar.
b.	increases human capital and the wages of workers.
c.	only helps firms sort workers into high-ability and low-ability workers.
d.	reduces the wage gap between high-skill and low-skill workers.

20.

All of the following would tend to increase a worker's wage except

a.	working the night shift.
b.	working harder.
c.	more education.
d.	having a greater amount of natural ability.
e.	doing a job that is fun.

21.

In a competitive market, which of the following is least likely to be the source of a persistent discriminatory wage differential?

a.	All of these answers could be the source of a persistent discriminatory wage differential.
b.	the customer
c.	the government
d.	the employer

22.

If two jobs require the same amount of skills and experience, the job that pays the most is most likely to be the one that is

a.	unpleasant.
b.	all of these answers.
c.	safe.
d.	fun.
e.	easy.

23.

In the UK since 1979 the benefit in terms of salary of having a university degree has

a.	stayed the same.
b.	increased.
c.	first increased and is now decreasing.
d.	decreased.

24.

Which of the following is true regarding the earnings of attractive versus unattractive workers?

a.	Attractive people tend to earn less because attractive people are viewed as shallow and more self-absorbed and, therefore, as less productive.
b.	Attractive people tend to earn more because they may actually have a larger value of marginal product.
c.	Attractive people tend to earn more because attractive people usually have greater human capital.
d.	Attractive people tend to earn less because attractive people usually have less human capital.

25.

Economists have hypothesised that the widening gap between the wages of unskilled workers and skilled workers may be due to

a.	decrease in the demand for unskilled workers because of increases in technology and increases in international trade.
b.	increase in the number of unskilled workers available due to immigration into the UK.
c.	decrease in the demand for unskilled workers because workers are more poorly educated.
d.	increase in the number of unskilled workers available because workers are more poorly educated.

26.

Which of the following professionals is most likely to be able to generate the income of a superstar?

a.	the best professor.
b.	the best writer.
c.	All of these answers participate in markets that could generate a superstar.
d.	the best accountant.
e.	the best medical doctor.

27.

It is not considered discrimination when an employer offers different opportunities to individuals that differ only by their

a.	productivity.
b.	age.
c.	sex.
d.	race.

28.

In order for a market to support superstars it must have which of the following characteristics?

a.	It must be involved in professional athletics.
b.	Every customer must be indifferent to the price they pay and the seller must be a competitor in the market for the product.
c.	Every customer must be willing to pay an enormous amount for the product and the product must be a necessity.
d.	Every customer must want the good supplied by the best producer and the technology must exist for the best producer to supply every customer at low cost.

29.

Which of the following statements regarding discrimination is true?

a.	The existence of a wage differential among groups is strong evidence of discrimination in the labour market.
b.	Discrimination can only persist in a competitive labour market if customers are willing to pay to maintain the discriminatory practice or the government requires discrimination.
c.	Bigoted employers are the main source of a persistent discriminatory wage differential in a competitive market.
d.	Discrimination cannot exist in a competitive labour market.

30.

Competitive markets tend to

a.	increase labour market discrimination because some workers can charge more for their services than other workers in a competitive market.
b.	have no impact on labour market discrimination.
c.	reduce labour market discrimination because non-discriminating firms will employ cheaper labour, earn more profits, and drive discriminating firms out of the market.
d.	increase labour market discrimination because bigoted employers can charge any price they want in a competitive market to cover the cost of their discrimination.

31.

A wage differential among groups may not by itself be evidence of discrimination in the labour market because different groups have

a.	different preferences for the type of work they are willing to do.
b.	different levels of job experience.
c.	all of these answers are correct.
d.	different levels of education.

32.

Which of the following is not a reason why some workers are paid above the equilibrium wage?

a.	minimum-wage laws
b.	efficiency wages
c.	unions
d.	beauty

33.

Which of the following is likely to generate a compensating differential?

a.	One employee is more attractive than another.
b.	One employee is more educated than another.
c.	All of these answers generate compensating differentials.
d.	One employee works harder than another.
e.	One employee is willing to work the nightshift while another is not.

34.

Which of the following explanations of wage differentials is not likely to be true?

a.	Men have more human capital than women.
b.	Employers in competitive markets are bigots.
c.	Men have more job experience than women.

35.

Which of the following could result in women being paid less than men?

a.	women obtaining less human capital because they don't plan to work continuously to the age of retirement
b.	women entering and leaving the labour force to care for children
c.	customers preferring to deal with men
d.	women preferring to work in pleasant clean safe work places
e.	all of these answers