Question

1. If “threat effects” of unionization cause non-union wages to rise in highly-unionized industries, then the union wage gap:

(a) Overstates the union wage gain. (b) Understates the union wage gain. (c) It’s ambiguous.

2. An increase in the relative demand for high-education workers (relative to low-education workers) will cause:

(a) Greater wage inequality between high- and low-education workers.

(b) Less wage inequality between high- and low-education workers. (c) Greater wage inequality among high-education workers.

(d) Greater wage inequality among low-education workers.

3. According to the simplest model in class, discrimination based on prejudice (as opposed to statistical discrimination) will lead to:

(a) Only white workers being hired.
(b) Only black workers being hired.
(c) Some firms hiring all white workers; some firms hiring all black workers. (d) None of the above.

Answer 1

Answer 1:

Option A. This will lead to overstatement of the union wage gap in the economy.

Answer 2;

Option A. This will lead to greater wage inequality between high and low education workers.

Answer 3;

Option C. Some firms will hire all black and other will hire only white workers.