Q&A Hero

Q: The marginal productivity theory of income distribution states that A) as more and more units of labor are added to a fixed quantity of capital, eventually labor's contribution to a firm's income will decrease. B) income distribution is determined by the marginal productivity of the factors of production that individuals own. C) factors of production in short supply command higher prices than those available in abundant quantities. D) capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains.

Q: A firm's demand for labor curve is also called its A) marginal revenue product of labor curve. B) marginal factor cost of labor curve. C) marginal valuation curve. D) marginal benefit of labor curve.

Q: The marginal productivity theory of income distribution was developed by A) Edward Lazear. B) George Akerlof. C) William Stanley Jevons. D) John Bates Clark.

Q: Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 17-1. Suppose the market price of doilies rises to $3. What happens to the curve given in the diagram? A) Nothing, because labor's productivity has not changed. B) There will be a movement along the curve. C) The curve shifts to the right. D) We cannot answer the question without knowing if Dale would want to hire more workers.

Q: The labor market in Major League Baseball features A) a monopoly by the League in employing professional baseball players that is offset by the players' membership in a labor union. B) a monopsony by the League in employing professional baseball players that is offset by the players' membership in a labor union. C) an oligopoly by the League in employing professional baseball players that is offset by an oligopsony by the players in the labor market. D) monopolistic competition between the teams and professional baseball players.

Q: Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 17-1. If Dale can sell her doilies at $2 each, what is the marginal product of the 5th worker? A) $28 B) 28 doilies C) 14 doilies D) $56

Q: Compared to a competitive market, a firm that has a monopsony in a labor market would A) hire fewer workers and pay higher wages. B) hire more workers and pay lower wages. C) hire fewer workers and pay lower wages. D) hire more workers and pay higher wages.

Q: Figure 17-1 Figure 17-1 shows the marginal revenue product for Dale's Hand-Sewn Doilies, a producer of linen doilies. Refer to Figure 17-1. If the wage rate is $40, how many workers should Dale hire? A) 6 units B) 5 units C) 4 units D) 3 units

Q: Marginal productivity theory implies that in a perfectly competitive market economy, a worker will receive income A) equal to the value of her marginal contribution to the production process. B) that is greater than the value of her marginal contribution to production process. C) that is less than the value of her marginal contribution to the production process. D) greater than, less than, or equal to the value of her marginal contribution to the production process, depending on her ability to negotiate with employers.

Q: What is the difference between a firm's marginal revenue and its marginal revenue product? A) Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker. B) Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker. C) Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in marginal product when a firm hires an additional worker. D) There is no difference between the two terms.

Q: The marginal productivity theory of income states that a person's total income is determined by A) the amount and productivity of factors of production the individual owns. B) how much the individual works. C) how profitable the firm the individual works for is. D) how much the individual has inherited.

Q: What is the difference between labor's marginal product and marginal revenue product? A) The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker. B) The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker. C) The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue. D) Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

Q: According to the marginal productivity theory of income A) the greater the quantity of resources owned by an individual, the greater his incentive to increase productivity and his income. B) the average income received by an individual who supplies resources is influenced by the resources owner's marginal productivity. C) the income received by an individual who supplies labor services equals the incremental benefit generated to the firm by that individual's labor. D) the income received by an individual who supplies labor services equals the profit generated to the firm by that individual's labor.

Q: Marginal revenue product for a perfectly competitive seller is equal to A) the output price multiplied by the total product of labor. B) the output price multiplied by the number workers hired. C) the change in total revenue that results from hiring another worker. D) the marginal cost of production.

Q: The town of Saddle Peak has a fixed supply of mountain view lots. In this case, the price per square foot of mountain view lots is A) determined only by supply. B) determined only by demand. C) set by government officials of Saddle Peak. D) negotiated by environmental groups and property developers.

Q: Suppose you have worked at a local sandwich shop for six months and now you plan to ask your manager for a raise. How can you convince your manager that you are worth more money than you are currently being paid? A) by threatening to quit if he refuses to give you a raise B) by demonstrating to your manager the marginal revenue product your employment contributes to the sandwich shop C) by explaining to him how difficult it is for you to save enough money to go to college D) by convincing him that you are a dedicated worker and ready to take on more responsibilities at the shop

Q: Economic rent is defined as A) what you pay to rent your apartment or house. B) the revenue received by a factor of production with an upward sloping supply curve. C) the price of a factor of production that is fixed in supply. D) the surplus received by employing a factor of production in its highest valued use.

Q: Marginal revenue product of labor for a competitive seller is A) the change in total product from hiring one more worker. B) equal to the marginal product of labor multiplied by the output price. C) the output price multiplied by the quantity sold. D) the marginal revenue of the product multiplied by the output price.

Q: The Buda Agri Corporation is the sole employer in rural Hungary. In the labor market, Buda Agri is a A) monopolistic competitor. B) monopsony. C) monopoly. D) perfect competitor.

Q: Which of the following is not an example of a derived demand? A) Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators. B) Seth Bullock, a personal-injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages. C) Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market. D) As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

Q: Which of the following statements regarding equilibrium in the markets for capital and for a natural resource used in producing a good is true? A) The marginal revenue product of capital will equal the marginal revenue product of the natural resource. B) The rental price of capital will equal the price of the natural resource. C) The marginal product of capital will equal the rental price of capital and the marginal product of the natural resource will equal the price of the natural resource. D) The marginal revenue product of capital will equal the rental price of capital and the marginal revenue product of the natural resource will equal the price of the natural resource.

Q: The demand for labor is described as a derived demand because A) it is derived by workers seeking to earn income to fund the consumption of goods and services. B) it is derived by producers seeking to make profits by starting new businesses. C) it is derived from the demand for products that use labor in the production process. D) it is derived from government institutions which rely on labor markets for the purpose of raising tax revenue.

Q: The marginal revenue product of capital is A) the cost to the firm of renting an additional unit of capital. B) the change in the firm's revenue as a result of employing one more unit of capital, such as a machine. C) the economic rent received by hiring an additional unit of capital. D) the revenue generated by substituting capital for labor in the production process.

Q: Demand in factor markets differs from demand in product markets in that A) the demand for a factor of production is difficult to determine. B) the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers. C) demand for a factor of production is based on the tastes and preferences of firms. D) demand for a factor of production is based on the tastes and preferences of resource owners.

Q: If a firm is the sole employer of a factor of production, it is known as A) a monopoly. B) a competitor. C) a monopsony. D) an economically discriminating firm.

Q: The labor market is considered as one of the more important markets in an economy because A) most people typically earn the bulk of their income from wages and salaries. B) most people are concerned that wages determined in the labor market are unfair. C) the usual market forces do not hold in the labor market. D) the labor market does not reach an equilibrium.

Q: Wally, Vijay, Sandra and Consuela make up a software development team at Javasoft. The firm is considering implementing one of two incentive compensation schemes. In scheme A, each programmer receives an annual bonus if he or she meets all individual programming deadlines. In scheme B, members of the team share equally in a joint bonus if the team meets all of its product delivery deadlines. All four employees are equally talented but Wally is a slacker who does as little work as he can get away with. Which scheme might team members prefer? Which scheme will management prefer?

Q: In a market economy, the high salaries of some star baseball players such as Zach Greinke, are determined by A) team owners, based on the total number of star athletes they plan to hire. B) advertising companies, based on what they are willing to pay to advertise their products at baseball games. C) the interaction of the demand for star athletes and the supply of star athletes. D) consumers, based on their willingness to watch baseball games.

Q: Companies often find it to be more profitable to use a commission or piece-rate system of compensation rather than a salary system, yet many firms continue to pay their workers salaries. List three reasons why a firm would choose a salary system of compensation.

Q: What is the difference between "straight-time pay," "commission pay," and "piece-rate pay"?

Q: What is personnel economics?

Q: One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.

Q: A firm might prefer to choose a salary system rather than a commission or piece-rate system of compensation when there are concerns about output quality.

Q: The application of economic analysis to human resources issues is called personnel economics.

Q: A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.

Q: When workers are paid on a piece-rate basis, an employer must be able to easily measure each worker's output.

Q: A commission system of compensation reduces the risk to workers during seasonal periods when business is sluggish.

Q: Workers who dislike risk A) prefer to be paid monthly rather than weekly or daily. B) prefer a piece-rate compensation system to a salary system. C) prefer a salary system to a commission compensation system. D) prefer to be paid a salary rather than a wage.

Q: If it is difficult for a firm to attribute the output it produces to a particular worker then A) its employees are likely to form a union. B) a commission system of compensation will be preferable to a salary system. C) a salary compensation system will be preferable to a commission system. D) a piece-rate system of compensation will be preferable to a salary system.

Q: Which of the following is not a reason for firms to choose a salary system rather than a commission system to compensate their employees? A) Research has shown that most companies will find that a salary system will be more profitable than a commission system. B) It is often difficult to attribute output to particular workers. C) If workers are paid on the basis of the number of units of output they produce, they may become less concerned about quality. D) Commission compensation systems are riskier for employees than a salary system, and many workers dislike risk.

Q: Edward Lazear analyzed data provided by the Safelite Group, the nation's largest installer of auto glass, after the company changed the way it paid its glass installers beginning in the mid-1990s. Instead of paying workers hourly wages, Safelite began to pay workers on the basis of how many windows they installed. Which of the following describes what Lazear concluded from his analysis of Safelite's data? A) Although workers installed more windows under the new system, Lazear found that there was also an increase in the number of workmanship-related defects. Lazear attributed this to workers taking short-cuts in order to earn higher wages. As a result, productivity did not improve and Safelite went back to paying hourly wages. B) Lazear found that worker productivity increased with the new system; about half of the increase in productivity was due to workers who continued with the company and half was due to new workers being more productive than those who left the company. C) Although worker productivity improved, the increase in hourly wages resulted in a significant decline in Safelite's profits. D) Because of a principal-agent problem, worker productivity was not affected by the new compensation system. However, Lazear attributed this to management problems that had nothing to do with Safelite's compensation system.

Q: The parent company of Safelite AutoGlass, the nation's largest installer of auto glass, changed the system it used to pay its glass installers in the mid-1990s. How did Safelite change its compensation system and what was the result? A) Safelite ended its system of paying workers on the basis of how many windows they repaired and replaced it with a system that paid workers hourly wages. As a result, productivity and worker morale improved. B) Safelite ended its system of paying workers hourly wages and replaced it with a system that determined wages on the basis of how many windows were repaired. As a result, productivity and worker morale suffered. Eventually, Safelite returned to its previous compensation system. C) The new system has not been in place long enough to determine whether it is an improvement over the previous compensation system. D) Safelite ended its system of paying workers hourly wages and replaced it with a system that determined wages on the basis of how many windows were repaired. As a result, productivity and worker morale improved.

Q: Which of the following economists is best known for exploring the application of economic analysis to human resources issues? A) Edward Lazear B) Claudia Goldin C) David Hammermesh D) Alan Krueger

Q: Mel's House of Cars is an automobile dealership that sells both new and used cars. Two other dealerships located nearer Mel's pay their salespeople a straight salary - they receive no commission for each car they sell. Mel has decided to pay all of his salespeople a commission on all car sales. Which of the following is most likely to occur as a result of Mel's decision? A) Mel will have difficulty finding salespeople. Research by labor economists has found that most employees prefer the security of a salary to the uncertainty of being paid based on how much revenue they generate for their employers. B) Mel will experience a principal-agent problem. Some of his salespeople will tend to shirk because they will not be paid if they sell no cars, regardless of how hard they work. C) Mel will be able to hire some of the most productive salespeople who work for the other two dealerships. D) Mel risks violation of federal law that regulates firms' compensation policies.

Q: The application of economic analysis to human resources issues is called A) resource economics. B) personnel economics. C) human economics. D) labor economics.

Q: Figure 17-6 Figure 17-6 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. Refer to Figure 17-6. Suppose Qmin = 2 windshields and Q*=5 windshields. Under Scheme II, a worker has to install Q* windshields before she earns an additional $20 per windshield installed. What is a potential problem with this scheme? A) Workers might be more concerned with increasing output beyond Q* and less concerned with the quality of their work. B) Any increase in output between Qmin and Q* benefits the employer only. C) It violates labor laws because workers are not compensated for output between Qmin and Q*. D) Workers have no incentive to produce output to between Qmin and Q*.

Q: Figure 17-6 Figure 17-6 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. Refer to Figure 17-6. Which of the following statements about Scheme II is false? A) It is likely to draw highly productive workers who see the opportunity to increase their wages. B) It could discourage less productive workers and induce them to leave the firm. C) It allows workers to increase their daily wage without penalizing those who are content with their daily wage. D) It is more risky for senior employees.

Q: Figure 17-6 Figure 17-6 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced. Refer to Figure 17-6. Under Scheme I A) workers compete with each other to see who can produce beyond Qmin in the shortest possible time. B) workers have no incentive to produce beyond Qmin. C) workers signal their productivity to the firm by consistently producing above Qmin. D) the incentive to increase productivity depends on where Qmin is set; if it is at a very high level, then workers will rise to the challenge for fear of losing their jobs.

Q: Despite evidence that companies will find it more profitable to use a commission system of compensation rather than a salary system, many companies continue to pay their workers salaries. Which of the following is one reason why firms choose a salary system? A) Most business owners and managers are not trained economists; therefore, they are unaware of the research that shows a commission system is more profitable than a salary system. B) Firms often use salary systems to overcome their principal-agent problems. C) Firms that have salary systems do not have to use compensating differentials to attract employees to do hazardous jobs. D) Many workers dislike risk and prefer to be paid a salary rather than to be paid by commission.

Q: Which of the following statements about commission systems of compensation is false? A) They increase the risk to workers because sometimes output declines for reasons not connected to the worker's effort. B) During sluggish periods, an employer's payroll expenses will decline along with sales. C) If workers are paid on the basis of the number of units produced, they may become less concerned about quality. D) The lack of income stability will induce the more productive workers to leave in search of more secure employment.

Q: Which of the following is a reason why some firms donot use commission pay? A) It gives workers incentive to produce more. B) It increases firm profits. C) It is difficult to measure the output and attribute output to a particular worker. D) The best workers stay and less productive workers leave.

Q: A successful compensation scheme A) must pay workers with comparable skills a comparable wage. B) must induce effort from workers and ensure that both employer and employees benefit. C) must enable workers to enjoy a certain standard of living and must enable employers to earn a normal rate of return. D) must allow employees to participate in a firm's profits.

Q: Personnel economics is A) the study of the factors that determine wage rates. B) the study of how workers are affected by tax law changes. C) the application of economic analyses to human resource issues. D) the application of economic analysis to the hiring decision.

Q: Figure 17-5 Refer to Figure 17-5 to answer the following questions. a. What is the equilibrium quantity of firefighters hired, and what is the equilibrium wage? b. What is the equilibrium quantity of paralegals hired, and what is the equilibrium wage? c. Explain why firefighters might earn a higher weekly wage than paralegals. d. Suppose that comparable worth legislation is passed, and the government requires that firefighters and paralegals be paid the same wage, $800 per week. Now how many firefighters will be hired and how many paralegals will be hired?

Q: Why do professional basketball players earn more than police officers? Illustrate this situation graphically.

Q: In the medical profession, pediatricians receive lower salaries than cardiologists. Suppose the government passes comparable worth legislation that requires hospitals to pay pediatricians the same salaries as cardiologists. Explain the effect of this legislation and illustrate your answer with demand and supply graphs for the following two scenarios: a. hospitals respond by placing salaries at a level between the two existing salaries b. hospitals respond by placing pediatricians' salaries at the initial level of cardiologists.

Q: The Equal Pay Act of 1963 requires that men and women be given equal pay for equal work in the same establishment. Most people agree that gender discrimination in the workplace is unfair, but many economists have criticized advocates of comparable worth. Is paying the same wages for jobs that have comparable worth mandated by the Equal Pay Act? Why don't most economists support proposals to force employers to pay their male and female employees based on comparable worth rules?

Q: Why are there superstar baseball players but no superstar chiropractors?

Q: What is a compensating differential?

Q: As nonunion construction workers replace a unionized work force, the average wage in the construction sector is likely to rise.

Q: Most economists believe that only a small gap between the wages of white males and the wages of other groups is due to education. Most of the gap is explained by discrimination.

Q: Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials.

Q: While labor unions tend to negotiate above-equilibrium wage rates for their members, they also tend to reduce the quantity of labor hired.

Q: The most important factor contributing to wage differences in the labor market is differences in the level of education and training among workers.

Q: In labor economics, the term "customer discrimination" refers to a situation where customers are charged different prices for services rendered by a firm.

Q: In a study conducted by Marianne Bertrand and Sendhil Mullianthan, identical resumes were sent in response to help wanted ads in newspapers, with half of the resumes assigned an African-American-sounding name and half assigned a white-sounding name. The study found that A) employers were equally likely to interview workers with white-sounding names and with African-American-sounding names. B) employers were 50 percent less likely to interview workers with African-American-sounding names. C) employers were 50 percent less likely to interview workers with white-sounding names. D) no employers chose to interview workers with African-American-sounding names.

Q: Compensating differentials are associated most closely with which of the following? A) hazardous jobs B) comparable worth C) economic discrimination D) differences in education

Q: A number of economists have estimated the impact of unionization on workers' wages. Which of the following is one conclusion reached by these studies? A) Union workers earn less than they would if they were not unionized. This is because of the impact of workers' strikes, during which union members do not receive wages. B) Holding constant the impact of other factors that affect wages, being in a union has no impact on a worker's wages. C) Being in a union increases a worker's wages by about 10 percent, holding constant other factors that influence wages. D) The share of national income received by workers has increased significantly over time; unions have been responsible for about one-half of the increase in workers' share of national income from the end of World War II to 2000.

Q: Many economists are critical of proposals to pass comparable worth legislation. Which of the following is the best explanation for this criticism? A) Comparable worth legislation will only lead to efficient market outcomes if women in low-paying jobs suffer from cognitive dissonance. B) Proposals for comparable worth legislation assume that wages for low-paying women's jobs should include compensating differentials. Economists believe that compensating differentials should be part of the wages for all jobs held by women. C) Proposals for comparable worth legislation call for increases in the wages of jobs held predominantly by women. Economists believe that this legislation should be used to increase the wages of all workers. D) Many economists believe that allowing markets to determine wages, rather than the rules required by comparable worth legislation, results in more efficient outcomes.

Q: Assume that a comparable worth law is passed that determines that kindergarten teachers and bricklayers have comparable jobs; therefore, workers in both of these occupations should be paid the same wages. Assume that prior to the law, bricklayers were paid a higher wage than kindergarten teachers. Which of the following is the most likely result of the comparable worth law? A) The equilibrium wage will be the same for kindergarten teachers and bricklayers. B) Some former bricklayers will become kindergarten teachers and some former kindergarten teachers will become bricklayers. C) There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers. D) There will be surplus in the market for bricklayers and a shortage in the market for kindergarten teachers.

Q: Marsha Murphy complained, "Many jobs that are filled mostly by men offer higher wages than most jobs that are typically filled by women. In many cases, the jobs men have require the same education and skills as the jobs women have. This is clearly unfair. Women should be paid the same wages as men are paid for jobs that are equivalent in terms of their qualifications." Which of the following statements describes Marsha's position? A) Marsha believes that women's wages should include a compensating differential. B) Marsha believes employers assume that men and women have different job preferences. C) Marsha believes that employers are reluctant to hire women for certain jobs because of cognitive dissonance. D) Marsha endorses a concept called comparable worth.

Q: Phil Harrison is a welder who works on skyscrapers and extension bridges. Phil's brother William is also a welder but he works in a manufacturing plant where he does all of his welding on ground level. Which of the following would not explain why Phil earns a higher wage than his brother? A) cognitive dissonance B) Phil has greater experience as a welder than his brother has. C) Phil's marginal revenue product is greater than William's marginal revenue product. D) Phil's job is more hazardous than William's job.

Q: One implication of compensating differentials is that laws passed to protect the health and safety of workers may not make workers better off than they were prior to the passages of the laws. Why is this so? A) Workers may suffer from cognitive dissonance, which means that the perception workers have that their jobs are hazardous is not true. B) If the laws make the work environment safer, there is no reason to pay workers a compensating differential for the risk associated with their jobs. C) The principal-agent problem that exists in the workplace may cause workers to shirk more after the work environment becomes safer. D) In non-competitive markets, workers are unlikely to receive a compensating differential to compensate for jobs with extra risk. As a result, after the laws are passed their wages will not change.

Q: According to two economists, George Ackerlof and William Dickens, how can cognitive dissonance affect workers' perceptions of their jobs? A) Cognitive dissonance makes workers believe that measures to improve their health and safety in the workplace are ineffective. B) Cognitive dissonance causes workers to perceive they are victims of discrimination when, in fact, they are not. C) Cognitive dissonance might cause workers to underestimate the true risks of their jobs. D) Cognitive dissonance causes a worker to believe his marginal revenue product is greater than it really is.

Q: Wage differences can be explained by all of the following except A) compensating differentials. B) differences in marginal revenue products. C) economic discrimination. D) comparable worth.

Q: Larry and Mike are equally skilled construction workers employed by the Brown and Root Company. Larry's job is riskier because he typically works on a scaffold 1,000 feet above ground. Larry's higher wage rate is the result of A) economic discrimination. B) a compensating differential. C) a negative feedback loop. D) a higher marginal revenue product.

Q: Paying a person a lower wage or excluding a person from an occupation on the basis of an irrelevant characteristic such as race or gender A) is economic discrimination. B) violates federal comparable worth laws. C) can be explained by negative feedback loops. D) creates differences in wages that economists call "compensating differentials."

Q: Competitive markets tend to eliminate economic discrimination, but there are many historical examples of firms that hired few, or no, black or female workers. Which of the following is not a reason for the persistence of this form of discrimination? A) In many cases, white workers refused to work with black workers. B) Some white consumers were unwilling to buy from companies that employed black workers. C) If discrimination makes it difficult for a member of a group to be hired in a particular occupation, there is less incentive for members of the group to be trained to enter that occupation. D) Laws passed by the federal government made it more expensive to hire black or female workers. As a result, it was less expensive for employers to hire mostly white male workers.

Q: An organization of employees that has the legal right to bargain with employers about wages and working conditions is called a A) closed shop. B) guild. C) labor union. D) monopsony.

Q: Most economists believe that a small amount of the gap between the wages of white males and the wages of other groups is due to discrimination. Which of the following factors is not another factor that explains part of this gap? A) differences in education B) geographic location C) differences in experience D) differing preferences for jobs