True/False
Indicate whether the
statement is true or false.
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1.
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A compensating differential is the difference in wages paid to workers who are
discriminated against and those who are not discriminated against.
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2.
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Workers on the night shift receive a compensating differential to offset the
disagreeable nature of working at night.
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3.
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In the last 25 years in the UK, the gap between the wages of university
graduates and non-graduates has been closing.
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4.
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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.
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5.
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Human capital is increased by education and on-the-job training.
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6.
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An apprentice will work for a relatively low wage because some of the
apprentice's pay is in terms of on-the-job training.
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7.
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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.
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8.
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If the signalling view of education is true, a policy of increasing the
education of workers will increase the wages of all workers.
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9.
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The evidence that attractive people are paid more than unattractive people
clearly demonstrates that the labour market discriminates against unattractive people.
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10.
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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.
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11.
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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.
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12.
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If there is a difference in wages among groups, it is evidence that there is
discrimination in the labour market.
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13.
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If it were not for minimum wage laws, workers would always be paid the
equilibrium wage.
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14.
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Competition will tend to eliminate discrimination in the labour market if
customers are not bigoted and if government does not require discrimination.
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15.
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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.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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16.
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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. |
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17.
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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. |
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18.
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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 |
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19.
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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. |
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20.
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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. |
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21.
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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 |
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22.
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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. | discriminatory. | c. | safe. | d. | fun. | e. | easy. |
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23.
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In the UK since 1979 the benefit in terms of salary of having a university
degree has
a. | stayed the same. | c. | first increased and is now decreasing. | b. | increased. | d. | decreased. |
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24.
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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. |
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25.
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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. |
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26.
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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. |
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27.
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It is not considered discrimination when an employer offers different
opportunities to individuals that differ only by their
a. | productivity. | c. | sex. | b. | age. | d. | race. |
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28.
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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. |
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29.
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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. |
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30.
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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. |
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31.
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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. |
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32.
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Which of the following is not a reason why some workers are paid above the
equilibrium wage?
a. | minimum-wage laws | c. | unions | b. | efficiency wages | d. | beauty |
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33.
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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. |
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34.
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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. | d. | Minimum wage legislation maintains differences in pay between
jobs |
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35.
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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 |
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