ONLINECO 

Chapter 19. Earnings and Discrimination. Gregory Mankiw. Exercises 6-9. Principles of Economics. 7th edition

 

6. When recording devices were first invented more than 100 years ago, musicians could suddenly supply their music to large audiences at low cost. How do you suppose this development affected the income of the best musicians? How do you suppose it affected the income of average musicians?

 

7. A current debate in education is whether teachersshould be paid on a standard pay scale based solelyupon their years of training and teaching experience,or whether part of their salary should be based upontheir performance (called “merit pay”).

a. Why might merit pay be desirable?

b. Who might be opposed to a system of merit pay?

c. What is a potential challenge of merit pay?

d. A related issue: Why might a school district decide to pay teachers significantly more than the salaries offered by surrounding districts?

 

8. When Alan Greenspan (who would later becomechairman of the Federal Reserve) ran an economic consulting firm in the 1960s, he primarily hired female economists. He once told the New York Times, “I always valued men and women equally, and I found that because others did not, good women economists were cheaper than men.” Is Greenspan’s behavior profit-maximizing? Is it admirable or despicable? If more employers were like Greenspan, what would happen to the wage differential between men and women? Why might other economic consulting firms at the time not have followed Greenspan’s business strategy?

 

9. This chapter considers the economics of discrimination by employers, customers, and governments. Now consider discrimination by workers. Suppose that some brunette workers do not like working with blonde workers. Can this worker discrimination explain lower wages for blonde workers? If such a wage differential existed, what would a profit-maximizing entrepreneur do? If there were many such entrepreneurs, what would happen over time?