Question

QUESTION 1

1. Which of the following is not a productivity based explanation for wage differentials?

   	a.	Differences in natural ability.
   	b.	Differences in experience lead to differences in wages.
   	c.	Differences in discrimination practices.
   	d.	Differences in formal education leads to differences in wages.

QUESTION 2

1. True or False: there is strong evidence that there still exists a gender gap, i.e. that, on average, women get paid less than men for doing the same work.

   	a.	True
   	b.	False

QUESTION 3

1. Which of the following helps to explain the stagnation, if not decline, of the real wages of blue-collar workers over the last 40 years?

   	a.	A decline in the real value of the minimum wage.
   	b.	All of the above.
   	c.	Decreased demand for labor due to mechanization in the manufacturing sector.
   	d.	A decline in union membership and union support.

QUESTION 4

1. Which of the following is not an explanation that we discussed in class for how unions impact the labor market?

   	a.	They restrict supply of labor by requiring union-membership, requiring licensing, etc.
   	b.	The negotiate wages directly, often above market equilibrium.
   	c.	We discussed alll three.
   	d.	They undertake activities to enhance the demand for labor, such as the demanding the use of labor-intensive technologies.

2. QUESTION 5

3. Which of the following is not an explanation for unemployment and wage differentials that is based upon failures in the labor market?

   	a.	A Minimum Wage
   	b.	Labor Immobility
   	c.	Differences in Education
   	d.	Statisticial Discrimination

QUESTION 6

1. Which of the following is an example of moral hazard in the labor market?

   	a.	Some work gets paid a premium in the labor market because it is undesirable work.
   	b.	All are examples of moral hazard in the labor market.
   	c.	Once workers are hired, it is difficult for managers to get them to work hard.
   	d.	It is difficult for employers to tell if job applicants have high ability and motivation or low ability and motivation.

2. QUESTION 7

3. Which of the following is not one of the ways we measure income inequality?

   	a.	The Gini Coefficient.
   	b.	The minimum wage.
   	c.	Income shares of the households with the most income relative to the income shares of the poorest households.
   	d	Income shares of the households with the most income.

4. QUESTION 8

5. Which of the following is not true about the Gini Coefficient?

   	a.	A value of 1 means perfect income inequality and a value of 0 means perfect income equality.
   	b.	It takes into account the entirety of the income/wealth distribution, not just the top and/or bottom.
   	c.	Any point on the Lorenz curve tells us the % of total income earned by the bottom % of the income distribution.
   	d.	A value of 1 means perfect income equality and a value of 0 means perfect income inequality.

6. QUESTION 9

7. Which of the following is true about inequality in the United States over the last century?

   	a.	The top 0.1% of the wealth distribution owns just as much wealth as the bottom 90% of the wealth distribution.
   	b.	The bottom 40% of the wealth distribution owns just 0.3% of the nation’s wealth whereas the top 20% owns 84% of the nation’s wealth.
   	c.	Unfortunately, all of these are true.
   	d.	Inequality has been approximately U-shaped, reducing throughout the first three quarters of the 20th century but the growing since 1977 to where we are now back to early 20th century levels of income and wealth inequality.

8. QUESTION 10

9. Which is the most problematic of the causes of economic inequality?

   	a.	Inequality in economic opportunities.
   	b.	Differences in preferences.
   	c.	The decline in unionism.
   	d.	Inequality in ability and education.

QUESTION 11

1. At the output level defining allocative/economic/social efficiency:

   	a.	The areas of consumer and producer surplus necessarily are equal
   	b.	Consumer surplus exceeds producer surplus by the greatest amount
   	c.	The marginal social costs of producing the last unit of output exactly equal the marginal social benefits from consuming that unit
   	d.	Marginal social benefit exceeds marginal social cost by the greatest amount

Answer 1

1. The answer is option C

All the other options such as natural ability, experience and education will lead to differences in productivity as employees will differ in their natural strength, their productivity will be more if they are more experienced or more qualified. However, discrimination on any basis (gender, race, etc.) will not be based on prodcutivity as it is quite possible for people of different races or gender to have similar levels of productivity.

2. True

Gender pay gap and glass ceilings are reality all over the world. The rationale given by the employers is the lost productivity due to maternity leaves. However, it is on the decline.

3. All of the above

There has been decline in the real value as inflation has increased but minimum wages have not increased in the same proportion. Also, due to mechanization, most blue collar jobs can now be done with the help of machines. There has also been a lack in union representation of these members because of increased labour force participation which has lead to lower bargaining power of the unions.

4. All three

The more labourers are available outside the unions, the lesser if the bargaining power of the unions. Hence, to increase their bargaining power, they will restrict labour supply by reducing the supply of labour. Also, they lobby for higher wages more often, and ensure that labour requirement is not replaced by machines.

5. Option C - Education

Education is a personal choice and not based on market failures. However, lack of mobility of labour is a clear indication of market failure, as is a minimum wage restriction which reduced the demand for labour and statistical discrimination is when employers make employment decisions based on statistically available information which does not reflect true market information and is a result of information assymetry.

6. Once workers are hired, it is difficult for managers to get them to work hard

The employees will lose the motivation to work hard since they are already getting paid. This is the moral hazard. Getting paid more for undesirable work is not a moral hazard as it is more of an appreciation for their service, and neither is the employers not being able to gauge the commitment level of the applicants is precisely the reason why jobs have selection tests.

7. The minimum wage

Minimum wage is the amount that the employers have to pay to their employees and has nothing to do with measuring income inequality as this is the same for everyone. Gini coefficient measures the degree of inequality based on a reference frame of perfect equality, while income shares measure how much of the national income is going for each segment of the population, which also highlights inequality,

8. A value of 1 means perfect income equality and a value of 0 means perfect income inequality.

It is the other way, where 1 means inequality and 0 means equality. The rest of the options are all true and define the gini coefficient.

9. Option C

All these statements represent the trend of inequality in the US as the data available will suggest.

10. Option A

This is because even people with similar education and abilities do not get the same economic opportunities. The society is severely divided and only the well-to-do families can afford college education. This is not because their children are smarter, it is merely because a poor household with children with similar intellectual level cannot afford to send their children to college. Hence, the difference is in difference in economic opportunities, as candidates from poorer households do not get the same job opportunities as candidates from comparably well to do houses even if they have the same abilities.

11. Option C

While the first option "The areas of consumer and producer surplus necessarily are equal" also defines allocative efficiency, this is the option in the absence of externalities. In the presence of externalities, if the condition "The marginal social costs of producing the last unit of output exactly equal the marginal social benefits from consuming that unit" is not met, then the production function is not allocatively efficient. The other two options are clear divergences from allocative efficiency.