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Exam 19: Earnings and Discrimination

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Question 51

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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 C)
F) All of the above

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Question 52

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Figure 19-3 -Refer to Figure 19-3. Suppose the manufacturing labor market, which is nonunionized, is in equilibrium at a wage equal to $25. Suppose now that the AFL-CIO (a labor organization) organizes the workers in the manufacturing market and negotiates a wage of $30 per hour. Because of the union,

A) 80 people who were once employed are now unemployed.
B) 40 people who were once employed are now unemployed.
C) 80 people who were once unemployed are now employed.
D) 40 people who were once unemployed are now employed.

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

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Question 53

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The superstar phenomenon explains why professional athletes earn more than amateur athletes.

Education and on-the-job training are sources of human capital.

The changing gap in wages between unskilled and skilled workers is most likely related to a larger increase in demand for unskilled occupations relative to skilled occupations.

Economists would argue that the gender wage gap is narrowing because of efficiency wages.

Which theory states that education makes workers more productive?

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 male and female tutors, then the

Figure 19-8 ​ ​ -Refer to Figure 19-8. The figure shows labor demand and labor supply in a non-unionized labor market. If the current labor demand is D1 and the current labor supply is S1, when a minimum wage of $18 per hour is imposed in this market, how many unemployed workers result?

Table 19-1 $\begin{array} { | l | l | l | } \hline& \mathbf { 1 9 7 5 } & \mathbf { 2 0 1 1 }\\ \hline \text { Men } & \\\hline \text { High school, no college } & \$ 48,720 &\$46,038 \\\hline \text { College graduates } & \$ 69,146 & \$ 80,508 \\\hline \text { Percent extra for college grads } & + 42 \% & + 75 \% \\\hline & & \\\hline \text { Women } & & \\\hline \text { High school, no college } & \$ 28,006 & \$ 32,249 \\\hline \text { College graduates } & \$ 37,804 & \$ 58,229 \\\hline \text { Percent extra for college grads } & + 35 \% & + 81 \% \\\hline\end{array}$ Source: US Census Bureau and Mankiw's calculations -Refer to Table 19-1. What are two possible hypotheses to explain the changes in relative demand for high-skilled workers and low-skilled workers in recent years?

Figure 19-7 ​ ​ -Refer to Figure 19-7. Given demand, D1, and supply, S1, if wages adjust to balance labor supply and labor demand, what are the wage and quantity of labor?

Figure 19-5 -Refer to Figure 19-5. Given demand for labor, D₁, and supply of labor, S₁, what are the equilibrium wage and quantity of labor?

The most important type of human capital is

Higher levels of human capital are correlated with higher earnings because firms are willing to pay more for better-educated workers who have higher marginal productivities.

Lucy and Lincoln are salespeople working for the same company with equal skills, ability, and experience. Both are paid a small base salary but the majority of their compensation is in the form of a commission, which is a percentage of the sales they make. Lucy earns more each year than Lincoln. What can you conclude about Lucy and Lincoln?

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. Long-run competition in the after-school tutoring market is consistent with which of the following statements, assuming consumers do not discriminate between male and female tutors?

Suppose that the country of Libraria made a concerted effort to increase the educational level of its people. If this effort had no effect on the wages of its workers, one might consider this as evidence in support of

Table 19-1 $\begin{array} { | l | l | l | } \hline& \mathbf { 1 9 7 5 } & \mathbf { 2 0 1 1 }\\ \hline \text { Men } & \\\hline \text { High school, no college } & \$ 48,720 &\$46,038 \\\hline \text { College graduates } & \$ 69,146 & \$ 80,508 \\\hline \text { Percent extra for college grads } & + 42 \% & + 75 \% \\\hline & & \\\hline \text { Women } & & \\\hline \text { High school, no college } & \$ 28,006 & \$ 32,249 \\\hline \text { College graduates } & \$ 37,804 & \$ 58,229 \\\hline \text { Percent extra for college grads } & + 35 \% & + 81 \% \\\hline\end{array}$ Source: US Census Bureau and Mankiw's calculations -Refer to Table 19-1. In 2011, on average how much more income would a man with a college degree earn than a man with a high school degree?

When comparing average wages for male and female workers in the United States, wages paid to females have been about 40 percent less than those paid to male workers.

The human-capital theory of education maintains that workers who complete specific levels of education enhance their productivity through education.