Which of the Following Regarding Roy's Model of Earning Determination

question 5

Multiple Choice

Which of the following regarding Roy's model of earning determination is NOT correct?

• A) Wages are perfectly equalized across sectors, as workers with different skills choose the sector in which they earn more than in any other job.
• B) People choose their occupation (or type of job or employer) on the basis of comparative advantage.
• C) Comparative advantage results in a selection bias since workers with different sets of observed and unobserved skills tend to sort themselves into different jobs or occupations.
• D) A market clearing equilibrium holds because no worker would prefer to switch to a different kind of job in equilibrium.
• E) Most workers earn rents in equilibrium in the sense that the wage in the job they choose is higher than what they would get in other jobs.

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Definitions:

Cost Method

An accounting method used to value certain investments at their original purchase cost, without adjusting for market fluctuations.

Recognizes Dividends

The process by which a company records the payment of dividends to its shareholders in its financial statements.

Reported Net Income

The net income that a company reports in its financial statements, which represents the company's total earnings after expenses, taxes, and costs are subtracted from total revenue.

Total Proceeds

The entire sum of money received from a transaction or series of transactions, often before any deductions or expenses are taken into account.