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The return to investment in human capital is observed
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in the wage differential between workers.
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A difference in wages that reflects differences in the nonpay features of two jobs is called
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a compensating differential.
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The idea that minimum-wage laws lead to wages that exceed equilibrium levels
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is more applicable to unskilled-labor markets than to skilled-labor markets.
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Tom, the manager and owner of a small company, believes in the signaling theory of education, not the human capital theory. As such, we would expect Tom not to offer which of the following company benefits?
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tuition reimbursement for workers who take college classes
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According to the signaling theory of education, better-educated workers
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are likely to be high-ability workers.
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A unions major source of power is its
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ability to threaten a strike.
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A plumber who specializes in cleaning plugged sewer lines is typically paid a higher wage than a plumber who works on installing water systems in new residential housing. Which of the following would push the wages of plumbers who work on sewer lines higher?
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plumbers who work with sewer lines are likely to be perceived as having a "dirty" job.
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Human capital is
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an important determinant of wages, and it affects the production of goods and services.
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Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by
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race.
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Offering different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics is called
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discrimination.
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Firms that operate in competitive product markets and choose to practice discrimination in hiring workers
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are likely to eventually go out of business.
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One of the problems with calculating the true amount of discrimination that takes place in the market for labor is
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the difficulty in measuring productivity differences between workers.
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Some economists are skeptical of the argument that employers are responsible for discriminatory wage differences. They argue that market economies provide a natural remedy to employer discrimination, and that remedy is
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the profit motive.
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The poverty rate is
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the percentage of the population whose family income falls below a specified level.
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The Distribution of Income in Hapland
Refer to Table 20-3. According to the table, what percent of families in Hapland have income levels below $90,000?
Refer to Table 20-3. According to the table, what percent of families in Hapland have income levels below $90,000?
answer
60 percent.
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The income distribution in the United States shows that the income share of the top fifth of all families is
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more than 10 times the income of the bottom fifth.
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The poverty line is adjusted each year to reflect changes in the
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level of prices.
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Poverty is found to be correlated with
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age, race, and family composition.
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A familys ability to buy goods and services depends largely on the family's
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permanent income.
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The poverty line is
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All of the above are correct.
(established by the federal government; approximately equivalent to three times the cost of providing an adequate diet; an absolute level of income below which a family is deemed to be in poverty)
(established by the federal government; approximately equivalent to three times the cost of providing an adequate diet; an absolute level of income below which a family is deemed to be in poverty)
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A typical worker's normal or average income is called
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permanent income.
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The maximin criterion for government policies is associated with
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the school of thought called liberalism.
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Liberalism aims to raise the welfare of the worst-off person in society. This rule is called the
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maximin criterion.
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Suppose the government implemented a negative income tax and used the following formula to compute a family's tax liability:
Taxes owed = (1/4 of income) - $20,000
Refer to Scenario 20-2. A family earning $60,000 before taxes would have how much after-tax income?
Taxes owed = (1/4 of income) - $20,000
Refer to Scenario 20-2. A family earning $60,000 before taxes would have how much after-tax income?
answer
$65,000
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Assume that the government proposes a negative income tax that calculates the taxes owed as follows: Taxes Owed = (1/3 x Income) - 10,000. A family that earns an income of $30,000 will
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neither pay taxes nor receive an income subsidy.
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