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Exam 19: Earnings and Discrimination

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Question 31

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Scenario 19-5 Kofi works part-time at a department store after school. Kofi has worked at the department store for two years but still hasn't received a wage increase, even though newer employees have received raises. Kofi has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Kofi believes he is a victim of labor-market discrimination. -Refer to Scenario 19-5. Why might an economist be skeptical of Kofi's discrimination complaint?

A) Through antitrust laws, discriminating firms can be penalized with large fees.
B) Differences in wages alone do not by themselves prove discrimination.
C) Discrimination leads to profit maximization.
D) Even if customers dislike Kofi because he's not helpful, if the department store operates in a competitive market the department store will pay Kofi the same as other workers.

E) B) and C)
F) A) and D)

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Question 32

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It is increasingly clear that technological change is the only explanation for an expanding wage gap between high-skill and low-skill workers.

A) True
B) False

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Question 33

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Gerald earns a higher salary than his brother Peter because Gerald went to law school and is a lawyer, whereas Peter dropped out of college to work as a mechanic. The difference in salary illustrates a compensating differential.

Chris just completed his college degree from a prestigious university. He did not go to school to become more productive. Rather, he went to school and completed his degree to convey his innate productivity to employers. To which theory of education does he subscribe?

Why would a wage differential due to discrimination in hiring be unlikely to persist in a competitive labor market?

Daryn and Nick work for two different companies, but each performs the same job working on a loading dock. Daryn, however, earns a higher salary than his friend Nick The difference in salary could illustrate union wages if Daryn's annual salary is covered by a collective bargaining agreement and Nick's is not.

Offering different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics is called

Scenario 19-6 The after-school tutoring industry is competitive, and so is the labor market for after-school tutors. Suppose male and female tutors have equal experience and skill. Currently, some tutoring centers are biased and will only hire male tutors, whereas unbiased tutoring centers desire to hire the cheapest tutors and do not care about their genders. As a result, the equilibrium wage for male tutors is higher than that of female tutors. -Refer to Scenario 19-6. If consumers do not discriminate between biased and unbiased tutoring centers, then

For a "superstar" to emerge, it must be the case that

Explain how compensating differentials could contribute to differences between the average wages of men and women.

Politicians often point to wage differentials as evidence of labor-market discrimination against ethnic minorities and women; however, economists argue against this approach because people differ in the amount of human capital they have and the kinds of work they are willing and able to do.

The economic theory of labor markets suggests that wages are determined by labor supply and labor demand.

One of the problems with calculating the true amount of discrimination that takes place in the market for labor is the

Superstars earn high incomes due to their ability to satisfy the demands of millions of people at once.

Studies show that white women earn approximately 25% less than white men. From this data alone, one should not conclude that white women are victims of discrimination. Name two other factors that could explain the difference in wages.

Scenario 19-5 Kofi works part-time at a department store after school. Kofi has worked at the department store for two years but still hasn't received a wage increase, even though newer employees have received raises. Kofi has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Kofi believes he is a victim of labor-market discrimination. -Refer to Scenario 19-5. Which of the following statements would strengthen Kofi's case against his employer?

The difference in wages paid to actors and actresses performing on Broadway versus a community theater is most likely due to

In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has

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.

The accumulation of investments in people, such as education and on-the-job training, is known as