Econ 151B
Exam 2A
Version 1
Fall 2019
PART I.
True/False. 1 point each. Circle the correct answer.
The hourly marginal revenue of all workers in a particular labor market is MRP = 15-L, where L is the number of workers. If L is 8 and the wage paid to women is $6.00, then then the employer is engaging in discrimination.
T F
In the Lundberg and Startz model discussed in class, the relationship between wages and an employee’s “signal” was described. The wage was always on the vertical axis and the signal was always on the horizontal axis. In the model, the association between the wage and the employee’s signal is steeper when the signal is noisier.
T F
The wages of black workers relative to white workers have been increasing continuously since the 1964 Civil Rights Act.
T F
Labor market discrimination can occur even if employers are not prejudiced, but when there is prejudice then discrimination is inevitable.
T F
After controlling for hours of work, the female/male wage ratio is 90%
T F
Other things equal, in the model of employer discrimination one would predict that the observed level of labor market discrimination will fall as the supply of minority workers increases
T F
Racial profiling is an example of customer discrimination
T F
Differences in education levels can explain part of the female/male wage gap but do not explain any part of the black/white wage gap.
T F
Wage discrimination that is driven by customer prejudice is more likely to be observed when the good that is being bought and sold is a latte (or other coffee shop drink) than when the good that is being bought and sold is a car.
T F
In a competitive market, statistical discrimination will be eliminated
T F
1) The diagram below shows what was happening to male labor force participation rates between 1950 and 2000. Explain how the patterns below may have contributed to the increase in black/white wage ratio in the post Civil Rights era. (3 points)
2) “Profit maximizing, competitive firms will not discriminate in the hiring of workers unless
consumers exercise a preference for discrimination in market products.” (2 points)
Explain why you believe that this statement is true or false.
3) The graph below depicts a competitive market for female labor with many sexist employers
Based on this figure, what is the equilibrium wage ratio Wf/Wm? Note: Wfis the average wage of female workers. Wm is the average wage of male workers. (2 points)
4) Suppose that there are two groups of potential workers: group A and group C. On average, group A is more skilled than group C. An unbiased test is given to all applicants, and the test is equally good at predicting the skill levels of individuals in each group. However, the test is “noisy,” in that it is not a perfect predictor of an individual’s skill level. Therefore, the employer determines workers’ wages using information on an individual’s test score (T), and using information on the average skill level (a) of the group to which the individual belongs.
The diagram below shows the relationship between wages and the test score for group A. The dotted line is a 45 degree line.
a) What is the value of the test score at the point where the line for group A crosses the 45 degree line? (2 pnts)
b) On the diagram above, draw the relationship between wages and the test score for group
C relative to group A. Make sure that you label the relationship for each group. (2 pnts)
c) Do the two lines cross? Is one steeper than the other? Explain how they compare to each
other and why they look the way they do in relationship to each other. (3 pnts)