Question 1

Business owners who care only about making money are
A)likely to discriminate against certain groups of workers.
B)likely to be replaced by discriminating businesses.
C)more concerned about racial discrimination than gender discrimination.
D)at an advantage when competing against those who practice discrimination.

Accepted Answer

Business owners who focus solely on making money rather than discriminating against certain groups of workers are at an advantage because they are more likely to attract a diverse array of talented workers and customers. Discrimination can limit the pool of available talent and restrict the business's potential customer base. Therefore, a business that does not discriminate has a competitive advantage in attracting the best talent and customers.

Question 2

Which of the following is an example of customer discrimination?
A)A foreign government prevents women from legally working as teachers.
B)White theater goers prefer to watch movies with white stars rather than black stars.
C)Customers prefer more experienced lawyers over less experienced ones.
D)All of the above are correct.

Accepted Answer

Customer discrimination refers to a situation where customers show bias or prejudice towards a particular group based on personal preferences such as race, gender, or age. Option B is a clear example of customer discrimination, where white theater goers show a preference for white stars over black stars. Option A refers to government discrimination and Option C refers to a valid customer preference based on experience level, rather than discrimination.

Question 3

Some discriminatory hiring practices can be expected, even if markets are competitive, as a result of
A)unrestricted entry and exit in markets.
B)lower costs of hiring.
C)a perfectly elastic market demand.
D)customer preferences.

Accepted Answer

Customer preferences can lead to discriminatory hiring practices, even in competitive markets. Employers may choose to hire certain individuals based on the preferences of their customers or clients, which can result in discrimination against certain groups. For example, if a company's clients prefer to work with people of a certain race or gender, the company may be more likely to hire individuals who fit those preferences, even if they are not the most qualified candidates.

Question 4

"The customer is always right" explains
A)the higher wages paid to members of a union.
B)compensating differentials.
C)persistent wage discrimination based on consumer preferences.
D)All of the above are correct.

Accepted Answer

The answer of "The customer is always right" explains
A)the higher...

Question 5

A study of segregated streetcars in the southern United States in the early twentieth century found which of the following?
A)Firms that ran the streetcars were more interested in segregating customers by race than profits.
B)The firms that ran the streetcars were unanimous in their support of laws that required segregation of races.
C)Before the passage of laws that mandated segregation of races on streetcars, segregation of smokers and nonsmokers was more common than segregation of races.
D)Segregation based on gender was more common than race at first.

Accepted Answer

The study found that before segregation based on race was mandated by law, segregation based on smokers and nonsmokers was more common than segregation based on race. This contradicts options A and B, and there is no mention of gender segregation in the study.

Question 6

A competitive market may be consistent with a discriminatory wage differential if
A)firms' customers have discriminatory preferences.
B)the wage differential is explained by a compensating differential.
C)the wage differential is explained by differences in human capital.
D)All of the above are correct.

Accepted Answer

A discriminatory wage differential can be consistent with a competitive market if firms' customers have discriminatory preferences. This means that employers may be willing to pay certain workers more because it is believed their presence will attract more customers who have a preference for workers of a certain gender, race, or ethnicity. In a competitive market, employers will be forced to pay the market wage for workers with similar skill sets, but in a market where customers have discriminatory preferences, employers may be willing to pay certain workers more due to their perceived ability to attract more business.

Question 7

When firms focus on profit maximization, which form of wage discrimination is least likely to occur?
A)discrimination based on race
B)discrimination in sports
C)consumer discrimination
D)discrimination based on educational attainment

Accepted Answer

The answer of When firms focus on profit maximization, which...

Question 8

If employers are profit-maximizers, then
A)competition will always eventually eliminate employment discrimination.
B)employment discrimination may persist if consumers discriminate.
C)employment discrimination will persist because it is always profitable.
D)compensating differentials cannot exist.

Accepted Answer

If consumers discriminate, they may choose to only buy from companies that employ certain groups of people, and so employers who want to maximize profits will choose to hire those groups. As a result, employment discrimination may persist even though employers are profit-maximizers.

Question 9

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and barbers with hair, then
A)competitive pressure in the market for haircuts will eventually cause the equilibrium wage in both markets to be identical.
B)the equilibrium wage in the "bald" market will eventually fall.
C)the equilibrium wage in the "hairy" market will eventually rise.
D)wages in the market for barbers can never be in equilibrium.

Accepted Answer

If consumers do not discriminate between bald and nonbald barbers and the market for haircuts is competitive, then the demand for haircuts will be the same regardless of the barber's hair status. As a result, the market for barbers will be determined by supply and demand forces, and the equilibrium wage will eventually be the same in both markets. Competition among barbers, regardless of their hair status, will eventually drive down wages in the low-wage "bald" market and drive up wages in the high-wage "nonbald" market until they are in equilibrium.

Question 10

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4. If consumers do not discriminate between bald barbers and barbers with hair, then
A)all barbershops now earn a normal economic profit.
B)competition will ensure the difference in wages will persist.
C)barbershops that hire barbers with hair will be more profitable than those that don't.
D)barbershops that hire bald barbers will be more profitable than those that don't.

Accepted Answer

Since consumers do not discriminate between bald and nonbald barbers, the only thing that matters to them is the quality of the haircut. Therefore, barbershops that hire bald barbers will be able to provide haircuts at a lower cost (due to the lower wage) than those that hire nonbald barbers. This gives barbershops that hire bald barbers a cost advantage, making them more profitable. As a result, we can expect more barbershops to hire bald barbers, which will eventually raise the wage in the bald barber market and reduce the wage in the nonbald market, until the two wages converge.

Question 11

Which of the following statements is not correct?
A)If a firm discriminates by paying short workers less than tall workers, the firm may be able to compete in the market if the firm's customers also prefer taller workers to shorter workers.
B)If the government passes regulations that prevent shorter workers from working in higher paying jobs, taller workers may continue to earn higher wages than shorter workers.
C)Government regulation that prohibits discrimination is economically necessary because market forces support discrimination.
D)Competitive markets will eliminate discrimination in wages over time unless customer preferences also reflect discrimination and/or government intervention promotes discrimination.

Accepted Answer

The statement that government regulation prohibiting discrimination is economically necessary because market forces support discrimination is not correct. In fact, competitive markets will eliminate discrimination in wages over time unless customer preferences also reflect discrimination and/or government intervention promotes discrimination. Therefore, government intervention may not always be necessary.

Question 12

If there is systematic discrimination against a group of workers, then the wage paid to those workers likely will be
A)lower due to a higher supply of workers in that group.
B)lower due to a lower demand for workers in that group.
C)higher due to a lower supply of workers in that group.
D)higher due to a higher demand for workers in that group.

Accepted Answer

Systematic discrimination against a group of workers implies that they are facing a disadvantage in terms of opportunities or treatment compared to other groups. This leads to lower demand for the workers in that group as employers may have biases and stereotypes that influence their hiring decisions. As a result, the wage paid to those workers is likely to be lower.

Question 13

Scenario 19-5
Jason works part-time at a grocery store after school. Jason has worked at the store for two years but still hasn't received a wage increase, even though newer employees have received raises. Jason has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks. Jason believes he is a victim of labor-market discrimination.
-Refer to Scenario 19-5. Which of the following statements would weaken Jason's case against his employer?
A)Jason only works part-time; as a result, he has fewer hours of experience even though he has been with the company longer.
B)Jason doesn't accomplish as much in an hour as other workers doing the same job.
C)Other workers that got raises moved to the night shift or agreed to work weekends.
D)All of the above statements would weaken Jason's case.

Accepted Answer

The answer of Scenario 19-5
Jason works part-time at a grocery...

Question 14

Which of the following is an example of customer discrimination?
A)European soccer players earn more than U.S. soccer players since soccer is more popular in Europe.
B)Male basketball players in the NBA earn higher salaries than female basketball players in the WNBA since viewers prefer watching NBA games.
C)Golfers on the men's PGA tour earn more than golfers on the women's LPGA tour since people prefer watching the men play golf.
D)All of the above are examples of customer discrimination.

Accepted Answer

All of the given examples involve differential treatment of individuals based on customer preferences and demand for the product, which is considered customer discrimination. The salaries and earnings of individuals should be based on their skills, qualifications, and job responsibilities, not on customer preferences.

Question 15

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4. If some consumers in the market for haircuts have a strong preference for having their hair cut by a barber who is not going bald, then
A)the difference in wages will eventually disappear since a haircut is a homogeneous good.
B)barbershops that hire barbers with hair will be able to charge a higher price for a haircut to those consumers who have a strong preference for barbers with hair.
C)barbershops that hire barbers with hair will always be much more profitable.
D)barbershops that hire bald barbers will always be much more profitable.

Accepted Answer

If some consumers have a strong preference for a certain type of barber, then barbershops that hire those desired barbers can charge a higher price for their haircuts, leading to a higher wage for those barbers. This could potentially decrease the wage gap between bald and nonbald barbers, but it is unlikely that it will completely disappear since there will still be some consumers who do not have a preference. The profitability of barbershops will depend on the extent of consumer preference and the availability of each type of barber in the market.

Question 16

The fact that wage differentials continue to exist across different groups of workers leads economists to believe that
A)discrimination by customers is the most common type of economic discrimination.
B)differences in human capital and job characteristics must be important in explaining the differences in wages.
C)firms apparently are not profit maximizers.
D)the market has failed to properly allocate wages to different workers.

Accepted Answer

Wage differentials exist because of differences in human capital and job characteristics, as well as other factors such as discrimination, but the existence of wage differentials across different groups of workers suggests that differences in human capital and job characteristics are important in explaining the differences in wages. This means that the labor market is functioning properly in terms of allocating wages to workers based on their skills and attributes.

Question 17

If firms are competitive, then labor-market discrimination
A)cannot exist in either the short run or the long run.
B)will be more of a problem than if the market were monopolistic or imperfectly competitive.
C)likely will not be a long-run problem unless customers exhibit discriminatory preferences or government maintains discriminatory policies.
D)likely will be more of a problem in the long run than in the short run due to the zero-profit condition that characterizes long-run equilibrium for competitive firms.

Accepted Answer

In a competitive market, firms are price takers and cannot afford to discriminate in their hiring practices as it would lead to higher costs and lower profits. However, labor-market discrimination may still exist in the short run due to imperfect information or individual biases of employers. In the long run, competition leads to elimination of profit margins and firms cannot afford to discriminate even if they have personal biases. Therefore, in the long run, labor-market discrimination is likely to be a problem only if customers exhibit discriminatory preferences or government maintains discriminatory policies. Thus, option C is the correct answer.

Question 18

Scenario 19-4
Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive.
-Refer to Scenario 19-4. Competition in the market for haircuts is consistent with which of the following statements?
A)Firms hiring nonbald barbers will have a cost advantage, leading to an increase in the demand for nonbald barbers.
B)All firms that hire only bald barbers will go out of business.
C)Firms hiring bald barbers will enter the market, increasing the demand for bald barbers.
D)Firms hiring nonbald barbers will enter the market, increasing the demand for nonbald barbers.

Accepted Answer

In a competitive market for haircuts, firms seek to minimize costs. Since bald barbers have a lower equilibrium wage, firms hiring them can offer competitive prices, encouraging more firms to enter the market and hire bald barbers, thus increasing the demand for bald barbers.

Question 19

Which of the following explains why soccer players make millions of dollars in Europe but do not in the United States?
A)discriminatory rules established by the government
B)compensating wage differentials for living in Europe
C)discriminatory preferences on the part of US sports fans for other sports
D)efficiency wages paid to European players to enhance on-field performance

Accepted Answer

Soccer is not as popular in the United States as it is in Europe, and the preferences of US sports fans are more inclined towards other sports like football, basketball, and baseball. Therefore, soccer players do not receive as much demand and attention in the US, which results in a lower salary compared to their peers in Europe.

Question 20

Discrimination may persist even in competitive markets when the source of the discrimination is
A)employer prejudice.
B)customer prejudice.
C)wage prejudice.
D)employee prejudice.

Accepted Answer

Discrimination may persist even in competitive markets when the source of discrimination is customer prejudice. Even if the employers are willing to hire people regardless of their race, gender, or ethnicity, the customers may prefer or avoid certain groups, resulting in discrimination against those groups in the labor market.

Quiz 19: Earnings and Discrimination

Business owners who care only about making money are

Which of the following is an example of customer discrimination?

Some discriminatory hiring practices can be expected, even if markets are competitive, as a result of

"The customer is always right" explains

A study of segregated streetcars in the southern United States in the early twentieth century found which of the following?

A competitive market may be consistent with a discriminatory wage differential if

When firms focus on profit maximization, which form of wage discrimination is least likely to occur?

If employers are profit-maximizers, then

Which of the following statements is not correct?

If there is systematic discrimination against a group of workers, then the wage paid to those workers likely will be

Which of the following is an example of customer discrimination?

The fact that wage differentials continue to exist across different groups of workers leads economists to believe that

If firms are competitive, then labor-market discrimination

Which of the following explains why soccer players make millions of dollars in Europe but do not in the United States?

Discrimination may persist even in competitive markets when the source of the discrimination is