Critical Thinking Questions

22 . What is a monopsony? 23 . What is the marginal cost of labor? 24 . How does monopsony affect the equilibrium wage and employment levels? 25 . What is a bilateral monopoly? 26 . How does a bilateral monopoly affect the equilibrium wage and employment levels compared to a perfectly competitive labor market? 27 . Describe how the earnings gap between men and women has evolved in recent decades. 28 . Describe how the earnings gap between Black and White people has evolved in recent decades. 29 . Does a gap between the average earnings of men and women, or between White and Black people, prove that employers are discriminating in the labor market? Explain briefly. 30 . Will a free market tend to encourage or discourage discrimination? Explain briefly. 31 . What policies, when used together with antidiscrimination laws, might help to reduce the earnings gap between men and women or between White and Black workers? 32 . Describe how affirmative action is applied in the labor market. 33 . What factors can explain the relatively small effect of low-skilled immigration on the wages of low-skilled workers? 34 . Have levels of immigration to the United States been relatively high or low in recent years? Explain. 35 . How would you expect immigration by primarily low-skill workers to affect American low-skilled workers?

Critical Thinking Questions

36 . What is the marginal cost of labor for a firm that operates in a competitive labor market? How does this compare with the MCL for a monopsony? 37 . Given the decline in union membership over the past 50 years, what does the theory of bilateral monopoly suggest will have happened to the equilibrium level of wages over time? Why? 38 . Are unions and technological improvements complementary? Why or why not? 39 . Will union membership continue to decline? Why or why not? 40 . If it is not profitable to discriminate, why does discrimination persist? 41 . If a company has discriminated against minorities in the past, should it be required to give priority to minority applicants today? Why or why not? 42 . If the United States allows a greater quantity of highly skilled workers, what will be the impact on the average wages of highly skilled employees? 43 . If all countries eliminated all barriers to immigration, would global economic growth increase? Why or why not?

FIGURE 15.1Occupying Wall StreetOn September 17, 2011, Occupy Wall Street began in New York City’s Wall Street financial district. (Credit: modification of “Occupy Wall Street Day 2 2011 Shankbone” by David Shankbone/ Flickr Creative Commons, CC BY 2.0)

In this chapter, you will learn about:

• Drawing the Poverty Line
• The Poverty Trap
• The Safety Net
• Income Inequality: Measurement and Causes
• Government Policies to Reduce Income Inequality

BRING IT HOME Occupy Wall Street In September 2011, a group of protesters gathered in Zuccotti Park in New York City to decry what they perceived as increasing social and economic inequality in the United States. Calling their protest “Occupy Wall Street,” they argued that the concentration of wealth among the richest 1% in the United States was both economically unsustainable and inequitable, and needed to be changed. The protest then spread to other major cities, and the Occupy movement was born. Why were people so upset? How much wealth is concentrated among the top 1% in our society? How did they acquire so much wealth? These are very real, very important questions in the United States now, and this chapter on poverty and economic inequality will help us address the causes behind this sentiment.