Question : 17.4   Explaining Differences in Wages 1) Painters who paint water towers : 1387990

17.4   Explaining Differences in Wages

1) Painters who paint water towers earn higher wages relative to painters who paint houses because

A) the demand for tower painters is greater than the demand for residential painters.

B) painting water towers is more risky than painting houses.

C) the tower painters’ union is probably more powerful than the house painters’ union.

D) the supply of water tower painters exceeds the supply of house painters.

2) Wage differentials between occupations can be explained by all of the following except

A) the fact that some occupations require higher levels of human capital than others.

B) the fact that some occupations are more desirable than others.

C) the market power of different employers.

D) the relative differences between demand and supply in various occupations.

3) A study by Price Fishback and Shawn Kantor of the University of Arizona shows that after the passage of workers’ compensation laws, wages received by workers in the coal and lumber industries fell.

Source: Price V. Fishback and Shawn Everett Kantor, “Did Workers Pay for the Passage of Workers’ Compensation Laws?” Quarterly Journal of Economics, Vol. 100, No. 3, August 1995, pp. 713-742.

Which of the following could explain why passage of workers’ compensation laws led to a fall in wages in some industries?

A) The passage of the workers’ compensation laws made it more expensive for firms to employ workers, thus reducing the demand for workers.

B) The passage of the workers’ compensation laws allowed employers in hazardous industries to reduce compensating differentials which, in turn, reduce wages.

C) Employers reduced wages to partially offset the cost of having to purchase insurance that would compensate workers for injuries suffered on the job.

D) The supply of labor in these hazardous industries increased following the passage of the workers’ compensation laws because jobs in these industries now pose less risk.

4) Some superstar athletes in the sports industry earn very high levels of income relative to other occupations, and over time the wage differential has been increasing. What could have caused this?

A) The supply of star athletes has decreased.

B) The supply of star athletes has increased due to college athletic programs.

C) Technological advances such as cable television has increased the demand for sports entertainment.

D) The market power of athletes’ unions has increased.

5) Which of the following explains why talented major league baseball players command much higher salaries than neurosurgeons?

A) because the total value of baseball games is much higher than the total value of neurosurgery

B) because it takes far more skill and training to be a major league baseball player than to be a neurosurgeon

C) because the supply of talented major league baseball players is relatively low compared to the supply of neurosurgeons. Therefore, major league baseball players exert far more market power than neurosurgeon.

D) because the supply of talented major league baseball players is low relative to its demand compared to the supply of neurosurgeons. Therefore, adding another player yields far greater marginal benefit than adding another neurosurgeon.

6) Compensating differentials are

A) non-monetary benefits from being employed, such as health-care benefits.

B) wages paid to workers where the supply of labor is great relative to demand.

C) higher wages that compensate workers for unpleasant aspects of a job.

D) higher wages that compensate the more experienced workers in a field.

7) Which of the following is an example of a compensating wage differential?

A) Nurse anesthetists are paid less than anesthesiologists (who have medical degrees).

B) Workers in a dynamite mine receive higher wages than if they worked in other jobs that require the same level of skills.

C) In the market for lawyers, top graduates from the top programs earn starting salaries that are significantly higher than the starting salaries earned by lower-ranked graduates from the lower-ranked programs.

D) Popular movie stars like George Clooney command much higher salaries than other talented but lesser-known actors.

8) If national laws protecting the health and safety of workers completely eliminate any and all risk, then

A) workers in risky occupations become better off.

B) compensating wage differentials disappear and workers in risky occupations may be no better off.

C) compensating differentials would grow because workers could not be compensated by being given lower risk jobs.

D) more people would be employed.

9) If workers in nuclear power plants underestimate the true risk of their jobs,

A) employers will pay compensating differential to compensate employees fully for the risk they have assumed.

B) safety legislation will not make workers better off.

C) the wages of these workers will not be high enough to compensate them fully for the risk they have assumed.

D) the supply of workers in this occupation will exceed demand.

10) Economic discrimination takes place when an employer

A) pays workers the lowest wage possible.

B) pays workers different wages on the basis of some arbitrary characteristics of workers that are irrelevant to the job performed.

C) pays lower wages to workers who are not as productive as other workers.

D) pays workers compensating wage differentials.