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CHAPTER 12B—LABOR MARKETS
MULTIPLE CHOICE
1) Wage differentials are due exclusively to differences in market structure.
a. True
b. False
Answer: B
2) Wage differentials exist in the long run because
a. labor markets are perfectly competitive
b. all jobs are equally attractive to all workers
c. the prices of goods vary by market
d. there are too many workers in the labor force
e. not all workers are equally qualified to perform every job
Answer: E
3) One explanation for the existence of wage differentials in the long run is that
a. not every job is equally appealing to all workers
b. all labor markets are perfectly competitive
c. workers are equally able to perform every job
d. the number of workers varies by market
e. population trends influence the demand for labor
Answer: A
4) Wage rates may vary among labor markets for each of the following reasons, except one.
Which is the exception?
a. differences in job risks
b. differences in social status associated with the job
c. differences in market size
d. differences in educational requirements
e. differences in job training requirements
Answer: C
5) Wages typically vary among individuals for all of the following reasons, except one.
Which is the exception?
a. differences in ability

b. geographical differences in the cost of living
c. differences in educational attainment
d. differences in labor market experience
e. differences in the prices of the goods produced by labor
Answer: E
6) If men, on average, earn 20 percent more than women in a particular occupation,
a. this is clear evidence of discrimination
b. some of this differential could be due to differences in human capital
c. most but not all of the differential is due to discrimination
d. comparable worth laws must not be in effect
e. men must have higher skills levels than women
Answer: B
7) Consider an economy in which all labor markets are perfectly competitive, all workers are
equally able to do any job, and the nonwage attributes of all jobs are equally attractive to all
workers. Which of the following would occur in a labor market where the current wage rate
exceeds wage rates in alternate markets?
a. Labor demand will decrease, and the equilibrium wage rate will fall.
b. Labor demand will increase, and the equilibrium wage rate will fall.
c. Labor demand will increase, and the equilibrium wage rate will rise.
d. Labor supply will decrease, and the equilibrium wage rate will rise.
e. Labor supply will increase, and the equilibrium wage rate will fall.
Answer: E

8) Consider an economy in which all labor markets are perfectly competitive, all workers are
equally able to do any job, and the nonwage attributes of all jobs are equally attractive to all
workers. Figure 12-1 shows supply and demand curves in the labor markets for maintenance
workers and machinists. In the long run, the hourly wage rate(s)
a. for machinists will fall to $8
b. for maintenance workers will rise to $11
c. will equalize below $8 in both markets
d. will equalize between $8 and $11 in both markets
e. will equalize above $11 in both markets
Answer: D
9) Less-risky professions tend to enjoy compensating wage differentials.
a. True
b. False
Answer: B
10) More enjoyable professions tend to enjoy compensating wage differentials.
a. True
b. False
Answer: B
11) Advocates of comparable worth favor eliminating all differences in wage rates among
employees of the same firm.
a. True

b. False
Answer: B
12) All else constant, the quantity of labor supplied is inversely related to the amount of
training required for a job.
a. True
b. False
Answer: A
13) Which of the following is a reason why a particular job may pay a higher-than-average
wage rate?
a. low educational requirements
b. high fringe benefits
c. free parking
d. high risk
e. low skill requirement
Answer: D
14) Which of the following is a reason why job A would pay a higher wage rate than job B?
a. job B requires more education
b. job A offers greater fringe benefits
c. job A offers free parking
d. job A involves greater risk
e. job B has a higher skill requirement
Answer: D
15) Everything else being equal, a job in which workers face a relatively small chance of
being laid off would generally have
a. a lower wage rate
b. a higher wage rate
c. more fringe benefits
d. higher skill requirements
e. no expected wage differentials in equilibrium
Answer: A
16) The difference in wage rates needed to make two jobs equally attractive to workers is
known as a(n)

a. equilibrium wage rate
b. competitive wage
c. equalizing wage
d. compensating wage differential
e. efficient wage
Answer: D
17) The higher wage rate received by garbage collectors to compensate for the lower
desirability of their job
a. would not exist in a competitive labor market
b. is a compensating wage differential
c. is caused by union negotiators
d. disappears in the long run
e. only applies when the garbage collecting market is an oligopoly
Answer: B
18) Which of the following jobs is most likely to have a positive compensating wage
differential?
a. economist
b. baker
c. accountant
d. stunt person
e. computer programmer
Answer: D
19) Positions that involve a considerable amount of personal risk
a. typically have negative compensating wage differentials
b. usually have better fringe benefits for employees
c. have higher demand by firms
d. pay lower wages
e. typically have positive compensating wage differentials
Answer: E
20) Which of the following could help explain why professional football players have high
salaries?

a. There is little social status attached to the occupation.
b. Their marginal revenue products are typically very low.
c. They face a high chance of having their careers cut short.
d. Many college football players want to become professional football players.
e. The labor market is perfectly competitive due to the players' union.
Answer: C
21) Teachers often earn less than truck drivers because
a. teachers could switch to trucking more easily than truckers could switch to teaching
b. trucking is a riskier occupation
c. truckers require greater education
d. teachers have more job mobility
e. trucking has a higher social status
Answer: B
22) If a worker is indifferent between a job with a wage of $12 per hour and a job with a
wage of $15 per hour, then the
a. higher-paying job enjoys a compensating wage differential of $3 per hour
b. higher-paying job enjoys a compensating wage differential of $15 per hour
c. lower-paying job is intrinsically more attractive than the higher-paying job
d. lower-paying job is just as attractive as the higher-paying job
e. worker's preferences are not rational
Answer: A
23) Patrick is considering two different jobs in the same city-one as a bicycle courier, and the
other as a mail room clerk. Both require equivalent training. He finds neither job very
appealing, but, if they pay the same wage rate, Patrick would prefer to work as a mail room
clerk. In order for Patrick to find the two jobs equally attractive, the
a. mail room job must pay a compensating wage differential
b. mail room job must pay a preference premium
c. courier job must pay a compensating wage differential
d. courier job must involve longer working hours
e. mail room job must involve longer working hours
Answer: C

24) Each of the following, except one, is an example of a nonmonetary job characteristic.
Which is the exception?
a. the monthly wage
b. safety
c. potential for advancement
d. required physical exertion
e. leisure activities available in the surrounding community
Answer: A
25) One difficulty with the idea of comparable worth is that
a. it does not address the idea of compensating wage differentials
b. it would reduce the federal budget deficit
c. it would cause aggregate wages to fall
d. a government agency cannot accurately evaluate the many different characteristics of jobs
e. it would not take into account differences in the supply of labor among firms
Answer: D
26) A difference in wage rates that results from a difference in working conditions
a. is known as a compensating wage differential
b. is known as an equalizing differential
c. reflects a difference in marginal productivity
d. reflects job-market discrimination
e. will be eliminated if all labor markets are perfectly competitive
Answer: A
27) Jobs that require more costly training generally have
a. higher wages
b. lower employment levels
c. less human capital required
d. higher personal risk levels
e. lower wages
Answer: A
28) The time spent by students in college
a. leads to lower future wages

b. is an investment in human capital
c. decreases human capital by lowering work experience
d. would be a positive compensating wage differential in markets for student labor
e. increases as the wage rate rises
Answer: B
29) If labor were completely mobile between Muncie, Indiana, and Lexington, Kentucky, and
the cost of living was the same in each city, we would expect to find that
a. accountants in Muncie earn the same wage rate as garbage collectors in Lexington
b. garbage collectors in Lexington earn more than accountants in Muncie
c. garbage collectors in Muncie earn the same wage rate as accountants in Lexington
d. all accountants in Lexington would earn the same wage rate
e. accountants in Muncie earn the same wage rate as accountants in Lexington
Answer: E
30) The more dangerous of two jobs currently pays $3 more per hour. The jobs are equivalent
in all other respects. If labor is migrating from the higher-risk job to the lower-risk job, then
a. the equilibrium compensating wage differential is less than $3 per hour
b. the wage rate will drop for the more dangerous job
c. the wage rate will rise for the less dangerous job
d. the equilibrium compensating wage differential is greater than $3 per hour
e. equilibrium is unattainable in the two labor markets
Answer: D
31) In the same city, one job currently pays $6 more per hour than another job. The two jobs
have equivalent training requirements, but labor is not migrating toward the higher-paying
occupation. Both markets are perfectly competitive. Which of the following conclusions is
correct?
a. The lower-paying occupation has less attractive nonmonetary characteristics.
b. There are barriers to entry into the higher-paying occupation.
c. The higher-paying occupation has a dominant labor union.
d. There are barriers to entry into the lower-paying occupation.
e. The higher-paying occupation has less attractive nonmonetary characteristics.
Answer: E

32) The equilibrium compensating wage differential between two occupations in the same
city is $10 per hour. Both occupations have equivalent training requirements. Shannon works
in the higher-paying occupation and would have been willing to do so even if the
compensating differential was $5 per hour. Therefore,
a. Shannon will migrate to the lower-paying occupation
b. Shannon must have a greater distaste than the typical worker for the nonmonetary
characteristics of her occupation
c. the equilibrium compensating wage differential is more than enough to prevent Shannon
from moving to the other job
d. the higher-paying occupation cannot have a perfectly competitive labor market
e. Shannon must have a greater preference than the typical worker for the lower- paying
occupation
Answer: C
33) Which of the following would most likely cause a job to command a compensating wage
differential?
a. There are barriers to the entry of new workers into the job market.
b. The job is more dangerous than most other occupations.
c. Wage rigidity prevents the wage rate from falling to the equilibrium level.
d. There has been an increase in the price of another input that is substitutable for labor.
e. The job market is dominated by one large firm.
Answer: B
34) Suppose that the cost of living is 25 percent higher in Chicago than in Indianapolis. If
wages in Chicago are 10 percent higher on average than wages in Indianapolis, then
eventually the labor supply will
a. fall in Indianapolis, increasing the average wage there
b. fall in Chicago, increasing the average wage there
c. rise in Indianapolis, increasing the average wage there
d. rise in Chicago, decreasing the average wage there
e. fall in Indianapolis, decreasing the average wage there
Answer: B
35) Who are likely to earn higher incomes, doctors or nurses, and why?
a. doctors, because their training is more expensive
b. doctors, because their job has higher social status
c. nurses, because their job is more desirable

d. nurses, because their education is more costly
e. doctors, because there are more job openings for them
Answer: A
36) Two jobs have different training requirements, and the job that requires more extensive
training currently pays $20 more per hour. The jobs are equivalent in all other respects. If
labor is migrating from the job with lower training requirements to the job with greater
training requirements, then
a. the equilibrium compensating wage differential is more than $20 per hour
b. the equilibrium compensating wage differential equals $20 per hour
c. the wage rate will drop for the job with lower training requirements
d. the wage rate will drop for the job with greater training requirements
e. labor supply will increase for the job with lower training requirements
Answer: D
37) Each of the following, except one, can explain why a given job pays a compensating
wage differential. Which is the exception?
a. The job requires costly training.
b. The job is dangerous.
c. The job is in a city with a high cost of living.
d. The job requires a very high level of physical exertion.
e. An increase in product demand raises the demand for labor in this job.
Answer: E
38) The supply of labor to a particular job will be greater the
a. less the social status that is attached to the job
b. less training is required to perform that job
c. lower the fringe benefits are of the job
d. less flexible the work schedules are in the job
e. higher degree of personal risk involved in the job
Answer: B
39) Consider two perfectly competitive labor markets for jobs that require different skills but
are otherwise equivalent. One job currently pays a higher wage than the other job. This wage
differential
a. cannot persist in the long run

b. can persist only if there are significant differences in the nonmonetary characteristics of the
two jobs
c. can persist if workers in the lower-wage job lack the ability to gain the skills needed for the
higher-wage job
d. will be eliminated as labor supply to the higher-wage job increases
e. is likely unrelated to different workers' endowments of talent and intelligence
Answer: C
40) Differences in marginal revenue products among workers can help explain the presence
of wage differentials.
a. True
b. False
Answer: A
41) One reason why individuals with greater ability often receive higher wage rates is that
they
a. face discrimination
b. have low marginal products
c. have high marginal revenue products
d. face diminishing marginal returns
e. often are employed in industries experiencing economies of scale
Answer: C
42) Technological advances that increase the skill requirements for many jobs will tend to
a. make it more challenging for individuals to migrate from low-paying jobs to high-paying
jobs
b. make it easier for individuals to migrate low-paying jobs to high-paying jobs
c. have no impact on the ease of migrating from low-paying jobs to high-paying jobs
d. contribute to a more equal distribution of income
e. have no impact on the distribution of income
Answer: A
43) In comparing a job that requires a high level of skill to one for a job that requires a low
skill level, the high-skill job
a. will always command a higher wage than the low-skill job
b. can command a higher wage only if there is sufficient demand for the output produced by
the job

c. will command a higher wage whenever the nonmonetary characteristics of the two jobs are
equivalent
d. will command a higher wage whenever there is a relatively low supply of labor with the
required skill level
e. will command a higher wage whenever the two labor markets are perfectly competitive
Answer: B
44) Barriers that prevent workers from entering particular labor markets
a. decrease wage rates in those markets
b. increase employment in those markets
c. decrease discrimination in those markets
d. increase profits in those markets
e. increase wage rates in those markets
Answer: E
45) If a group of professionals successfully lobby the government to require workers in their
profession to have a license, the most likely result will be a(n)
a. reduction in the supply of such professionals and a decrease in their wage rate
b. reduction in the demand for such professionals and an increase in their wage rate
c. reduction in the supply of such professionals and an increase in their wage rate
d. reduction in the demand for such professionals and a decrease in their wage rate
e. increase in the demand for such professionals and an increase in their wage rate
Answer: C
46) Licensing laws
a. are illegal in most industries
b. serve to increase wage rates in some industries
c. lead to higher employment levels in some industries
d. reduce the quality of labor in a particular market
e. are rarely effective at increasing wage rates
Answer: B
47) If the American Medical Association lobbied successfully to eliminate licensing laws for
physicians,
a. physicians' salaries would increase
b. the supply curve of physicians would shift to the left

c. physicians' salaries would decrease
d. the supply curve of physicians would become more inelastic
e. the supply curve of physicians would become more elastic
Answer: C
48) Occupational licensing
a. provides access to employment opportunities for many new workers
b. typically benefits employees in the licensed occupation
c. enables the supply curves of labor to shift more readily in response to wage changes
d. is illegal in the United States
e. usually results in higher employment levels in the licensed occupation
Answer: B
49) If a professional organization imposes strict licensing procedures that increase entry costs
for new members, then labor
a. supply will fall, and the equilibrium wage rate will rise
b. supply will fall, and the equilibrium wage rate will fall
c. supply will rise, and the equilibrium wage rate will fall
d. demand will rise, and the equilibrium wage rate will rise
e. demand will rise, labor supply will fall, and the equilibrium wage rate will rise
Answer: A
50) Each of the following, except one, might be a barrier to entry into a labor market. Which
is the exception?
a. government restrictions
b. cost-of-living differentials
c. labor unions
d. discrimination
e. professional organizations
Answer: B

51) Figure 12-2 depicts labor demand and supply in a nonunionized labor market. The
original equilibrium is at point
A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of
$20, then
a. the labor supply curve and the labor demand curve will shift leftward by equivalent
amounts
b. there will be an excess supply of 3,000 workers
c. there will be an excess demand of 7,000 workers
d. there will be an excess supply of 4,000 workers
e. there will be an excess supply of 7,000 workers
Answer: E
52) Figure 12-2 depicts demand and supply in a nonunionized labor market. The original
equilibrium is at point
A. If a labor union subsequently negotiates an hourly wage for its members of $20, then the
profit-maximizing employment level
a. rises from 6,000 to 10,000
b. rises from 3,000 to 10,000
c. drops from 10,000 to 3,000
d. drops from 6,000 to 3,000
e. remains unchanged

Answer: D
53) Consider two labor markets in which jobs are equally attractive in all respects other than
the wage rate. All workers are equally able to do either job. Initially, both labor markets are
perfectly competitive. If a union organizes workers in one of the markets, then wage rate will
tend to
a. rise in both markets
b. fall in both markets
c. rise for the union job, but remain unchanged for the nonunion job
d. fall for the nonunion job, but remain unchanged for the union job
e. rise for the union job and fall for the nonunion job
Answer: E
54) Unions attempt to raise wage rates for their members by
a. reducing the supply of the product their members produce
b. lowering barriers to entry so their members have greater opportunities
c. reducing the demand for labor so there are fewer nonunion competitors
d. negotiating a higher-than-competitive wage rate
e. lowering the marginal product of nonunion labor
Answer: D
55) Discrimination occurs when a group of people have different opportunities because of
characteristics that have nothing to do with their individual abilities.
a. True
b. False
Answer: A
56) When members of a group enjoy different opportunities that cannot be attributed to
differences in ability,
a. discrimination is said to occur
b. comparable worth laws are ineffective
c. licensing agreements must be in effect
d. all wages in the market will be the same
e. the demand for labor will increase
Answer: A

57) If prejudice originates with employers, market forces work to reduce discrimination and
lower wage differences between the favored and unfavored groups.
a. True
b. False
Answer: A
58) Men and women in a particular industry are equally qualified. If one employer has a
preference for male employees, then in the long run
a. men will receive higher wages
b. women will receive higher wages
c. there will be no wage differential between men and women
d. comparable worth laws would create wage differentials between men and women
e. the demand for male employees will decrease
Answer: C
59) If an employer begins to pay higher wages to white workers, then in the short run
a. wages for white workers would fall
b. wages for nonwhite workers would rise
c. profits would rise as nonwhite workers leave the firm
d. output will increase and prices will fall
e. profits would fall as nonwhite workers leave the firm
Answer: E
60) Many economists argue that the best way to correct employer discrimination is to
a. pass comparable worth laws
b. increase the price of output, thereby raising profit
c. shift the marginal revenue product curve of the unfavored group to the right
d. shift the demand for labor to the left
e. allow the market mechanism to equalize wages
Answer: E
61) A labor market is divided into two segments. All workers have the same qualifications
and find jobs in either segment equally attractive. Initially, both segments are in competitive
equilibrium. If the development of employer prejudice then reduces the employment of
minorities in one segment, there will be a
a. permanent drop in labor supply to the discriminating segment

b. permanent increase in labor supply to the nondiscriminating segment
c. temporary drop in labor supply to the discriminating segment
d. permanent drop in labor demand to the discriminating segment
e. temporary drop in labor demand to the nondiscriminating segment
Answer: C
62) A labor market is divided into two segments. All workers have the same qualifications
and find jobs in either segment equally attractive. Initially, both segments are in competitive
equilibrium. Then the development of employer prejudice reduces employment of minorities
in one segment. In the long run, there will likely be a change in
a. wage rates and the composition of the work force in both segments
b. neither wage rates nor the composition of the work force in either segments
c. wage rates, but not the composition of the work force, in both segments
d. the composition of the work force, but not wage rates, in both segments
e. the wage rate, but not the composition of work force, in the discriminating segment only
Answer: D
63) Even if employers are not prejudiced, employee or customer discrimination will tend to
be reinforced by market forces and may lead to permanent wage differences between the
favored and unfavored groups.
a. True
b. False
Answer: A
64) A labor market is divided into two segments. All workers have the same qualifications
and find jobs in either segment equally attractive. Initially, both segments are in competitive
equilibrium. Then the development of worker prejudice that reduces the hiring of minorities
in one segment can lead to a
a. permanent increase in labor supply in the discriminating segment
b. permanent increase in labor supply in the nondiscriminating sector
c. temporary change in the composition of labor in both segments which will revert back to
an equal distribution of workers eventually
d. temporary increase in labor supply in both segments
e. temporary change in wage rates in both segments
Answer: B
65) Prejudice can generate market forces that lead to a permanent shift of an unfavored
minority into low-wage jobs when the prejudice originates with

a. employees or customers
b. employers, employees, or customers
c. employees only
d. employers or employees
e. customers only
Answer: A
66) Market forces encourage discrimination in the case of
a. statistical discrimination only
b. employee and customer prejudice only
c. employer prejudice only
d. statistical discrimination and employee or customer prejudice
e. employer prejudice and statistical discrimination
Answer: D
67) Statistical discrimination refers to
a. the statistical measurement of the effects of prejudice on minorities excluded from
employment
b. the monetary impact of prejudice on minorities, in contrast to the nonmonetary impact
c. government tracking of the economy-wide impact of discrimination against minorities
d. using statistics to explain employer discrimination against minorities
e. exclusion of individuals from an activity due to the probability of behavior in their group
rather than personal characteristics
Answer: E
68) Which of the following is a form of statistical discrimination?
a. Young people are charged higher automobile insurance rates due to the higher probability
of an accident.
b. Restaurants prefer to hire women than men as servers.
c. Women prefer to see a female doctor than a male doctor.
d. Women are more likely than men to pay too much money for a new automobile because
salespeople bargain more with men than with women.
e. Female physicians earn 20 percent less than male physicians, on average.
Answer: A
69) Statistical discrimination

a. arises from employer prejudice
b. arises from consumer prejudice
c. does not involve prejudice by employers or consumers
d. is illegal in the United States
e. tends to reduce the profits of profit-maximizing firms
Answer: C
70) If neither employers nor consumers are prejudiced,
a. discrimination cannot occur
b. all wages will be equal for all workers
c. there will be no non-ability-based wage differentials between different groups of workers
d. statistical discrimination may still occur
e. all equally qualified potential workers have an equal chance of employment and
advancement
Answer: D
71) Comparing the median income of all white males to the median income of all black males
in order to determine the impact of job-market discrimination on earnings tends to
a. overestimate the impact because it does not account for differences in education and job
experience
b. underestimate the impact because it does not account for differences in education and job
experience
c. overestimate the impact because it accounts for differences in education and job experience
d. underestimate the impact because its accounts for differences in education and job
experience
e. correctly estimate the impact
Answer: A
72) The "vicious cycle of discrimination" refers to
a. the use of statistical discrimination to perpetuate the impact of employer prejudice on
minorities
b. the portion of the wage differential between two groups that cannot be accounted for by
differences in education and job experience
c. lower wage rates that reduce incentives to improve skill levels and gain job experience,
which perpetuates lower wage rates
d. any job-market discrimination that remains after all premarket discrimination has been
eliminated

e. job-market discrimination that leads to increased prejudices among workers and customers,
thus generating more discrimination
Answer: C
73) In the vicious cycle of discrimination,
a. a lower wage causes current job discrimination
b. a lower wage causes premarket discrimination
c. premarket discrimination leads directly to current job discrimination
d. employee discrimination causes employer discrimination
e. premarket discrimination leads to lower human capital investment
Answer: E
74) Wage differentials between groups can occur as a result of
a. job market discrimination and premarket discrimination only
b. differences in education, job experience, and geographic location only
c. job market discrimination and differences in education and job experience only
d. premarket discrimination and differences in geographic location only
e. premarket discrimination, job market discrimination, and differences in education, job
experience, and geographic location
Answer: E
75) The minimum wage is constant across the United States.
a. True
b. False
Answer: B
76) The beneficiaries of the minimum wage are confined to those in poverty.
a. True
b. False
Answer: B
77) In the short run, those who are hurt by the minimum wage are
a. some workers who lose their jobs
b. employers who have to pay more
c. consumers who have to pay more for goods
d. all of these

Answer: D
78) In the long run, those who are hurt by the minimum wage are
a. employers in non-minimum wage industries
b. employers who have to pay more
c. consumers who have to pay more for goods
d. all of these
Answer: C
79) Economists consider the minimum wage to be a
a. blunt instrument of social policy
b. finely tuned instrument of social policy
c. universally bad idea
d. policy that has no impact on poverty
Answer: A
80) Increases in the government-imposed minimum wage tend to increase unemployment
among unskilled workers.
a. True
b. False
Answer: A
81) Suppose there is a semiskilled labor market and two different unskilled labor markets.
Initially, all three markets are in competitive equilibrium. What would happen if the
government imposed a minimum wage rate above the competitive equilibrium rate in one of
the unskilled labor markets?
a. Wage rates will rise in all three markets.
b. Wage rates will rise in both unskilled labor markets, but remain unchanged in the
semiskilled labor sector.
c. Wage rates will rise in the semiskilled labor market and in the unskilled labor market
covered by the minimum wage, but fall in the other unskilled labor market.
d. Wage rates will rise in the unskilled labor market covered by the minimum wage, remain
unchanged in the other unskilled labor market, and fall in the semiskilled labor market.
e. Wage rates will rise in the unskilled labor market covered by the minimum wage, but
remain unchanged in the other two markets.
Answer: C
82) The Earned Income Tax Credit

a. is targeted to poor families
b. is less targeted to poor families than the minimum wage
c. is just a different name for the minimum wage
d. operates on the labor market in exactly the same as the minimum wage
Answer: A
83) The EITC tends to
a. increase employment just like the minimum wage does.
b. decrease employment just like the minimum wage does.
c. increase employment whereas the minimum wage decreases employment.
d. decrease employment whereas the minimum wage increase employment.
Answer: C
84) Jackson is considering two different jobs, and is indifferent to both of them although one
pays $20 per hour and the other pays $25 per hour. This must mean that
a. the higher-paying job must be more dangerous than the lower-paying job
b. the higher-paying job enjoys a compensating wage differential of $5 per hour
c. Jackson doesn’t really need the money
d. the lower-paying job enjoys a compensating wage differential of $5 per hour
e. the higher-paying job enjoys a compensating wage differential of $20 per hour
Answer: B
85) Brett is equally qualified for two different jobs -- video store clerk and coffee shop
cashier. Brett is initially indifferent between the two jobs but when he finds out that they pay
the same wage he prefers the job at the video store. This must mean that
a. the coffee shop pays a compensating wage differential.
b. the video store must be in a dangerous neighborhood.
c. the video job pays a compensating wage differential.
d. Brett decides he likes videos more than coffee.
e. the video job would require him to work harder.
Answer: C
86) Jacob is torn between two jobs, grounds keeper and street repair. He is indifferent
between the two jobs even though the street repair job pays $25 more per hour. This must
mean that
a. grounds keeper is a less attractive job

b. grounds keeper enjoys a compensating wage differential of $25
c. the demand for street repairmen is greater
d. street repair enjoys a compensating wage differential of $25
e. the demand for grounds keepers is greater
Answer: D

Test Bank for Microeconomics: Principles and Applications
Robert E. Hall, Marc Lieberman
9781111822569, 9781478405238, 9781478498056

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