1. Are people willing to work more for higher wages?
   
   Most people work to earn money to spend when they're not working. Even for people who really enjoy their jobs, the size of the paycheck affects how much they are willing to work. For individual workers, a higher wage rate has two effects: it encourages them to work more hours, but it also lets them enjoy more leisure time without lowering their standard of living. When wage rates get high enough, most people cut back the hours they work and take more leisure time, producing a backward-bending labor supply curve.
   
   
2. What are compensating wage differentials?
   
   The supply of and demand for different labor markets determine the wage and the number of people employed in those markets. If people and jobs were like wheat, there would be only one wage rate. But people and jobs differ, so wages are not all the same. Compensating wage differentials exist when differences in job characteristics result in wage differences. Economists are paid more than fast-food workers partly because much more education is required before one can become an economist.
   
   
3. Why might wages be higher for people with more human capital than for those with less human capital?
   
   Human capital is the skills and training acquired through education and on-the-job training. Human capital increases productivity, making workers more valuable to employers. Acquiring human capital has opportunity costs (time and money); therefore, it reduces the supply of labor for those jobs relative to the supply for jobs that do not require as much human capital.
   
   
4. What accounts for earnings disparities between males and females and between whites and nonwhites?
   
   A wide variety of factors affects the earnings of different groups of people. On average, people in some groups have more human capital than people in other groups; as we've seen, differences in human capital usually lead to differences in earnings. When a factor that is unrelated to marginal revenue product—for example, race, gender, or age—acquires a positive or negative value in the labor market, discrimination is occurring.
   
   
5. Are discrimination and freely functioning markets compatible?
   
   In a freely functioning labor market, discrimination should not exist: there is a profit to be made in not discriminating. Of course, discrimination does exist. One source of labor market discrimination is employers' personal prejudice. Hiring people on the basis of personal prejudice adds to employers' costs and is not compatible with free markets. A second source, statistical discrimination, is a way of dealing with a lack of information: employers wrongly perceive that all members of a group have characteristics that make them less productive. Statistical discrimination can lead to crowding and occupational segregation.
   
   
6. Why do CEOs, movie stars, and professional athletes make so much money?
   
   Economists explain that these high salaries are usually the result of the superstar effect. When success is measured in terms of winning (making the most profit, starring in the most popular movies, or winning sports championships), having the very best person instead of the second-best person greatly increases the chances of winning. So when several business firms, movie companies, or sports teams compete in trying to hire the very best CEOs, movie stars, or athletes, employers bid up the salaries the very best get paid.
   
   One benefit of the superstar effect is that it provides a real incentive for people who aren't the very best to try to become better, and it makes the superstars continue to work hard at being the best.