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Scenario 19-4 Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive. -Refer to Scenario 19-4.If consumers do not discriminate between bald barbers and barbers with hair,then


A) competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to be identical.
B) the equilibrium wage in the "bald" market will eventually fall.
C) the equilibrium wage in the "hairy" market will eventually rise.
D) wages in the market for barbers can never be in equilibrium.

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

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A signaling theory of education suggests that


A) people who attend college are more likely to capture a "beauty premium."
B) education is a signal of social status.
C) education does not necessarily increase productivity.
D) education will sever the link between innate ability and compensation.

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

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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.

E) None of the above
F) A) and B)

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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.


A) Albert, who prefers to be around other people but who works at home by himself
B) Amy, whose job provides little intellectual and personal satisfaction
C) Antoinette, whose preference is to avoid dangerous work but works as a firefighter
D) Arnold, who works the night shift and prefers to work at night and sleep during the day

E) B) and C)
F) None of the above

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Figure 19-1 Figure 19-1 -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. -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.

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

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In order to explain the widening gap in earnings between skilled and unskilled workers in recent years,economists have proposed two hypotheses.One hypothesis emphasizes


A) compensating differentials.
B) the increased recognition that a larger stock of human capital usually leads to higher earnings.
C) the decreasing importance of labor unions.
D) the increasing importance of international trade.

E) A) and D)
F) None of the above

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A college degree makes a person more productive according to


A) both the human-capital and the signaling theories of education.
B) the human-capital but not the signaling theory of education.
C) the signaling but not the human-capital theory of education.
D) neither the human-capital nor the signaling theory of education.

E) B) and C)
F) None of the above

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Which of the following scenarios would serve to decrease the demand for unskilled labor in our country?


A) increased productivity gains among the unskilled laborers
B) increased demand for goods produced by unskilled labor
C) increased international trade with countries where unskilled labor is more plentiful
D) increased supply of migrant workers

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

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George and Brad are waiters at a local restaurant.The female customers prefer to be seated at the tables that George waits on because they think George is better looking than Brad.If George earns more than Brad because of his better looks,this is an example of


A) effort playing a key role in wage differences.
B) differences in human capital.
C) a beauty premium.
D) a compensating differential.

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

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Which of the following is not correct?


A) Some economists believe that business owners who emphasize profit maximization will hire the most productive workers regardless of the personal characteristics of the worker; hence, these firms will drive discriminating firms out of business.
B) Two economists found that employers in Boston and Chicago were about 50 percent more likely to interview job applicants named Emily and Greg than those named Lakisha and Jamal.
C) Two economists found that women were less likely to participate in an experiment where they were paid based on math skills but more likely to participate when they were paid based on reading skills; men were more likely to participate when they were paid based on math skills and less likely to participate when they were paid based on reading skills.
D) Economists found that the prices of older baseball cards were about 10 percent lower when the player was black rather than white.

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

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Dr.Benson is regarded as,by far,the best dentist in his part of the country,yet his income is not significantly higher than the average income for a dentist in his area.In contrast,Bo Johnson,the best baseball player in that region,earns five times the average salary of all baseball players.The most likely explanation is that


A) the widespread perception that Dr. Benson is a great dentist is, in fact, incorrect.
B) the baseball players' union is more powerful than the professional association of dentists.
C) Bo Johnson, unlike Dr. Benson, can provide his services to millions of people simultaneously.
D) chance plays a role in determining people's incomes, resulting in earnings discrepancies that are hard to explain or justify.

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

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A manager of a small firm who believes in the signaling theory of education would encourage her employees to obtain additional education to raise their on-the-job productivity.

A) True
B) False

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List the productivity factors that may explain the differences in pay between men and women in similar occupations.Do any of these factors arise as a result of cultural or social traditions? If so,describe how changes in social relationships will affect the pay gap over time.

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Job experience,education,lifet...

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Which of the following is an example of human capital for a college economics professor?


A) years of experience
B) "clickers" which interface with an in-class computer system and display the results of student "votes"
C) chalk
D) internet access in the classroom

E) B) and D)
F) None of the above

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Discrimination is an emotionally charged issue that is impossible to study objectively.

A) True
B) False

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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

E) None of the above
F) B) and D)

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A compensating differential is a difference in wages due to higher levels of education or other forms of human capital.

A) True
B) False

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Increases in international trade and technological change have been offered as explanations for the


A) increase in demand for both skilled and unskilled workers in the United States.
B) increase in demand for skilled workers and decrease in demand for unskilled workers in the United States.
C) decrease in demand for skilled workers an increase in demand for skilled workers in the United States.
D) decrease in demand for both skilled and unskilled workers.

E) A) and B)
F) None of the above

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As a result of an increase in the earnings gap between skilled and unskilled jobs,the incentive to get a college education has been declining.

A) True
B) False

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In the early 20th century,streetcar seating which was segregated by race


A) was a result of economic discrimination by railroad company managers.
B) was less profitable than streetcar seating that didn't have restrictions.
C) was strongly supported by private streetcar companies.
D) led to higher revenue and lower costs for streetcar companies.

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

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