Question 1

Suppose the market wage rate for whites is $18 an hour and the monetary value a prejudiced employer attaches to the disutility of hiring African Americans is $3. This employer will be indifferent between hiring African Americans and whites only when the African-American wage rate is

Accepted Answer

The employer values the disutility of hiring African Americans at $3. Therefore, to be indifferent between hiring an African American and a white worker, the wage rate for African Americans must be $3 less than that for whites, making it $15 ($18 - $3).

Question 2

Ending discrimination against minority groups in educational processes and in employment situations would cause total domestic output to

Accepted Answer

Ending discrimination allows for a more inclusive workforce, enabling individuals from minority groups to contribute their skills and talents. This diversity can lead to increased creativity, innovation, and productivity in the labor force, thereby increasing total domestic output.

Question 3

If a prejudiced white employer behaves as if there is a disutility from hiring an African-American worker, then this disutility is measured by the

Accepted Answer

The discrimination coefficient is a measure used to quantify the extent of prejudice or bias an employer has against hiring individuals from certain groups, in this case, African-American workers. It reflects the perceived disutility or cost the prejudiced employer associates with hiring a worker from the discriminated group, beyond any considerations of productivity or qualifications.

Question 4

Assume that there is a supply and demand market for nonpreferred workers. If prejudice against these workers among employers decreases, then there will be a(n)

Accepted Answer

Decreased prejudice among employers would lead to an increased demand for nonpreferred workers, which would naturally result in a rise in their wage rate and an increase in their employment.

Question 5

The Temporary Assistance for Needy Families (TANF)program

Accepted Answer

The Temporary Assistance for Needy Families (TANF) program, established in 1996, replaced the Aid to Families with Dependent Children (AFDC) program. It introduced work requirements for recipients and imposed a five-year lifetime limit on receiving benefits, aiming to encourage employment and self-sufficiency among able-bodied adults.

Question 6

The earned-income tax credit (EITC)is, in essence,

Accepted Answer

The Earned Income Tax Credit (EITC) is designed as a refundable tax credit to benefit low- to moderate-income working individuals and families, effectively acting as a wage subsidy by reducing the amount of tax owed and potentially increasing the tax refund. It is not specifically aimed at corporate contributions, business investments in community programs, or income payments to those unable to work.

Question 7

When the occupational choices of women or minorities are restricted, this results in

Accepted Answer

Restricting occupational choices for women or minorities not only leads to lower wages for these groups due to limited opportunities but also results in a less efficient allocation of labor resources because it prevents the most skilled individuals from occupying positions that best match their abilities, regardless of their gender or ethnicity.

Question 8

In a supply and demand model of the labor market for nonpreferred workers, a reduction in employer prejudice against nonpreferred workers will

Accepted Answer

Reducing employer prejudice against nonpreferred workers would likely increase the demand for these workers as employers become more willing to hire them. This increased demand would raise the wage rate and increase employment among these workers, as employers are more inclined to hire from this group, reflecting a more inclusive approach.

Question 9

A major criticism of the welfare system that led to reforms in the mid-1990s is that welfare payments

Accepted Answer

The major criticism leading to welfare reforms in the mid-1990s was that welfare payments create dependency on government programs, discouraging recipients from seeking employment and becoming self-sufficient.

Question 10

The taste-for-discrimination model examines an employer's prejudice and discrimination in hiring by using tools of

Accepted Answer

The taste-for-discrimination model, developed by Gary Becker, uses demand theory to examine how an employer's prejudice against certain groups can affect hiring decisions and wage differentials. It posits that some employers are willing to pay a monetary premium to avoid hiring individuals from certain groups, which is analyzed within the framework of demand theory.

Question 11

One of the provisions of the Temporary Assistance for Needy Families (TANF)program was to

Accepted Answer

The Temporary Assistance for Needy Families (TANF) program, established in 1996, included a provision that set a 5-year lifetime limit on welfare benefits for recipients, aiming to encourage employment and self-sufficiency.

Question 12

The judging of an individual on the basis of the average characteristics of the group to which the individual belongs rather than the individual's characteristics is

Accepted Answer

Statistical discrimination occurs when individuals are judged based on the average characteristics of the group they belong to, rather than their own individual characteristics. This type of discrimination is based on assumptions or stereotypes about the group as a whole.

Question 13

Suppose that a prejudiced white employer is willing to hire white workers at a rate of $16/hour, and this employer has a discrimination coefficient of $4. This implies that the employer would

Accepted Answer

The discrimination coefficient of $4 means the employer values the productivity of nonwhite workers $4 less per hour than that of white workers. Therefore, to equalize the perceived value, the employer would be willing to hire nonwhite workers at $16 - $4 = $12/hour or less.

Question 14

In the taste for discrimination model, the perceived cost for a prejudiced white employer for hiring an African-American worker is

Accepted Answer

In the taste for discrimination model, a prejudiced employer perceives an additional "cost" or disutility when hiring an African-American worker, which is added to the actual wage of the African-American worker.

Question 15

From the economic point of view, discrimination

Accepted Answer

Discrimination in the economy can lead to underutilization of certain groups' skills and talents, resulting in an actual output that is below the potential output the economy could achieve if all individuals were given equal opportunities to contribute. This inefficiency can hinder overall economic growth and productivity.

Question 16

Suppose that white workers are getting paid $21/hour, while similarly productive African-American workers are getting paid $18/hour. A prejudiced white employer with a discrimination coefficient of $24/hour will

Accepted Answer

The discrimination coefficient of $24/hour means the employer values avoiding hiring African-American workers at $24/hour. Since this is higher than the wage difference ($21 - $18 = $3), the employer would not hire African-American workers even if they offer to work for free, as the "cost" of discrimination exceeds the wage savings.

Question 17

Which is a payment or wage subsidy made by the Federal government to offset Social Security taxes for low-income workers?

Accepted Answer

The Earned Income Tax Credit (EITC) is a refundable tax credit aimed at low- to moderate-income working individuals and families, particularly those with children, to offset the burden of Social Security taxes and provide an incentive to work.

Question 18

Assume that there is a supply and demand market for nonpreferred workers. If prejudice against these workers among employers increases, then there will be a(n)

Accepted Answer

If prejudice against nonpreferred workers increases among employers, the demand for these workers will decrease because employers will be less willing to hire them. This decreased demand leads to a fall in the wage rate for these workers and a decrease in their employment levels.

Question 19

Suppose that a prejudiced African-American employer has a discrimination coefficient of $5/hour. Suppose also that the market wage rate is $20/hour for African-American workers, and $18/hour for Hispanic workers. In this case, the employer will

Accepted Answer

The employer's discrimination coefficient of $5/hour means they perceive the cost of hiring Hispanic workers as $18 + $5 = $23/hour. To be indifferent between hiring African-American workers at $20/hour and Hispanic workers, the perceived cost for Hispanic workers must also be $20/hour. Therefore, the actual wage for Hispanic workers must be $23 - $5 = $18/hour, which means the employer will hire them if their wage falls to $15/hour.

Question 20

Which of the following statements about the Temporary Assistance for Needy Families (TANF)program is not true?

Accepted Answer

TANF actually imposed stricter work requirements and time limits, which effectively narrowed the eligibility for welfare assistance, contrary to expanding it.

Quiz 23: Income Inequality, Poverty, and Discrimination