The Fact That Wage Differentials Continue to Exist Across Different

question 65

Multiple Choice

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.

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Definitions:

Fairness, Equity

The quality of being impartial and just, and ensuring individuals receive what they deserve based on their needs, conditions, and contributions.

Compromise

A settlement of differences by mutual concessions or modification of demands.

Future Favors

A practice commonly seen in developing countries based upon mutual obligation and resulting in the exchange of favors over years and even generations; also used in some industrialized countries such as Japan and South Korea.

Inner Circle

A clique of trusted family members, tribal members, or friends (depending on the culture) who are at the center of power or influence.