Multiple Choice Questions
1. Ricky leaves his job as a high school math teacher and returns to school to study the latest developments in computer programming, after which he takes a higher paying job at a software firm. This is an example of
a. A compensating differential.
b. Human capital.
c. Signaling.
d. Efficiency wages.
2. Lucy and Ethel work at a local department store. Lucy, who greets customers as they arrive, is paid less than Ethel, who cleans the bathrooms. This is an example of
a. A compensating differential.
b. Human capital.
c. Signaling.
d. Efficiency wages.
3. Fred runs a small manufacturing company. He pays his employees about twice what other firms in the area pay, even though he could pay less and still recruit all the workers he wants. He believes that higher wages make his workers more loyal and hard-working. This is an example of
a. A compensating differential.
b. Human capital.
c. Signaling.
d. Efficiency wages.
4. A business consulting firm hires Vivian because she was a math major in college. Her new job does not require any of the mathematics she learned, but the firm believes that anyone who can graduate with a math degree must be very smart. This is an example of
a. A compensating differential.
b. Human capital.
c. Signaling.
d. Efficiency wages.
5. Measuring how much discrimination affects labor market outcomes is difficult because
a. Data on wages are crucial but not readily available.
b. Firms misreport the wages they pay to hide discriminatory practices.
c. Workers differ in their attributes and the types of jobs they have.
d. The same minimum-wage law applies to workers in all groups.
6. The forces of competition in markets with free entry and exit tend to eliminate wage differentials that arise from discrimination by
a. Employers.
b. Customers.
c. Government.
d. All of the above.