OxfordAQA International AS and A-level Economics: Discrimination and minimum wage (9640) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions test sections 3.3.4.5 (discrimination in the labour market) and 3.3.4.6 (minimum wage laws) of the OxfordAQA International AS and A-level Economics (9640) specification, version 1.2. Section 3.3 is extra International A2 content. All countries, firms and figures are invented. Read the study guide and revision notes first if needed. The OxfordAQA Economics hub, the printable checklist and the free diagnostics are also useful.

Questions

1. State two conditions necessary for an employer to pay equally productive groups of workers different wages. [2]

2. A firm in Country C pays these hourly wages. Men: 22, 24, 26, 30, 48. Women: 18, 20, 22, 24, 26.

(a) Calculate the mean pay gap. [2] (b) Calculate the median pay gap. [2] (c) Explain why the two gaps differ and why neither proves discrimination. [2]

3. A workshop hires two equally productive groups, P and Q. Marginal revenue product (MRP) is 36 an hour for both. Supply to the firm: group P, w = 18 + 0.15L; group Q, w = 12 + 0.3L, where w is the hourly wage and L the number of workers.

(a) Find the wage and employment for each group when the firm hires where marginal cost of labour equals MRP. [4] (b) Calculate the firm’s surplus (MRP minus wages, summed over all workers). [2] (c) A law requires both groups to be paid 27. Find employment of group Q and the new surplus. [3]

4. In Country D, 50 workers in group A and 150 in group B have equal skills. Occupation X has labour demand w = 40 − 0.2L, and occupation Y has w = 36 − 0.1L. Group B is barred from X. Output value is the area under demand: 40L − 0.1L² in X and 36L − 0.05L² in Y. Without the barrier, 80 workers would be in X and 120 in Y at a wage of 24.

(a) Calculate each occupation’s wage and the pay gap. [3] (b) Calculate the percentage fall in output value caused by the barrier. [4]

5. Explain two disadvantages of wage discrimination for the economy as a whole. [4]

6. In a competitive labour market, demand is L = 1,500 − 100w and supply is L = 50w + 300.

(a) Find the equilibrium wage and employment. [2] (b) A minimum wage of 9.50 is introduced. Calculate unemployment. [2] (c) Find the elasticity of labour demand over this wage rise. [2] (d) Calculate the change in the wage bill and explain it. [2]

7. One employer hires all workers in a town. Its MRP is w = 20 − 0.01L and labour supply is w = 2 + 0.01L.

(a) Find the wage and employment that maximise profit. [3] (b) A minimum wage of 10 is introduced. Find employment. [2] (c) Find the highest minimum wage at which employment is still at least the level in part (a). [2]

8. The national minimum wage is 9.00 in Year 1 (price index 100) and 9.45 in Year 2 (price index 106). Median pay in Year 2 is 15.

(a) Calculate the Year 2 minimum wage in Year 1 prices. [2] (b) Calculate the percentage change in the real minimum wage. [1] (c) Calculate the ratio of the Year 2 minimum to median pay. [1]

9. A rise in the wage from 10 to 10.50 cuts employment from 8,000 to 7,840. Calculate the elasticity of demand for labour and the percentage change in the wage bill. [3]

10. One country has a single minimum wage of 10. Region R has median pay of 14 and region S median pay of 25. Explain why the effects differ. [4]

11. Evaluate whether a national minimum wage benefits low-paid workers and the economy. [8]

Answers

1. Any two of the following, [1] + [1]: the employer has power over wages (monopsony or immobile workers); the groups can be identified and kept apart; the groups differ in supply elasticity; workers have poor information or limited mobility. [2] Examiner insight: State each condition precisely. “Discrimination happens” is a restatement, not a condition.

2. (a) Men: 150/5 = 30; women: 110/5 = 22 [1]. Gap = 8/30 = 26.7% [1] [2] (b) Medians 26 and 22 [1]. Gap = 4/26 = 15.4% [1] [2] (c) The 48 pulls up the male mean more than the median [1]. Job type, hours and experience may explain part of either gap, so only the unexplained part indicates discrimination [1] [2] Examiner insight: Divide by the higher average, state which average you used, and avoid claiming proof from raw data.

3. (a) Group P: MC = 18 + 0.3L; 18 + 0.3L = 36 gives L = 60 [1]; w = 18 + 9 = 27 [1]. Group Q: MC = 12 + 0.6L; L = 40 [1]; w = 12 + 12 = 24 [1] [4] (b) P: (36 − 27) × 60 = 540; Q: (36 − 24) × 40 = 480 [1]. Surplus = 1,020 [1] [2] (c) Q supplies (27 − 12)/0.3 = 50 workers [1]. P still supplies 60, so total 110 [1]. Surplus = (36 − 27) × 110 = 990 [1] [3] Examiner insight: Derive marginal cost from the supply curve for each group before equating it with MRP. Using the supply curve itself as MC gives wrong values.

4. (a) X: 40 − 0.2 × 50 = 30 [1]. Y: 36 − 0.1 × 150 = 21 [1]. Gap = 9/30 = 30% [1] [3] (b) With the barrier: X = 2,000 − 250 = 1,750 and Y = 5,400 − 1,125 = 4,275, total 6,025 [1]. Without: X = 3,200 − 640 = 2,560 and Y = 4,320 − 720 = 3,600, total 6,160 [1]. Fall = 135 [1], which is 135/6,160 = 2.2% [1] [4] Examiner insight: State the base for the percentage. A fall measured against the output with the barrier gives a different figure and does not answer the question.

5. Misallocation of labour: workers are in jobs where their marginal product is lower, so output is below its potential [1]; this lowers GDP and living standards [1]. Wider inequality: lower-paid groups have less income, so lower consumption and tax receipts, and may need more welfare spending [1]; this raises the burden on public finances [1] [4] Examiner insight: Each disadvantage needs a developed link to the whole economy. Naming “unfairness” alone is a one-sided point about the group.

6. (a) 1,500 − 100w = 50w + 300 gives w = 8 [1], L = 700 [1] [2] (b) Demand = 1,500 − 950 = 550 and supply = 475 + 300 = 775 [1]. Unemployment = 225 [1] [2] (c) Employment change −150/700 = −21.4% and wage change 1.5/8 = 18.75% [1]. Elasticity = −1.14 [1] [2] (d) 8 × 700 = 5,600 and 9.50 × 550 = 5,225, a fall of 6.7% [1]. Demand is elastic, so the percentage fall in employment is larger than the rise in the wage [1] [2] Examiner insight: Use the original values as the base, keep the sign of the elasticity and interpret it. Add a conclusion to the number.

7. (a) MC = 2 + 0.02L [1]. Set equal to 20 − 0.01L: L = 600 [1]; w = 2 + 6 = 8 [1] [3] (b) At 10, supply = 800 and demand = (20 − 10)/0.01 = 1,000 [1]. The firm cannot hire more than workers offer, so employment is 800 [1] [2] (c) Demand must be at least 600: 20 − w ≥ 6 [1], so w = 14 [1] [2] Examiner insight: Compare the quantity supplied with the quantity demanded at the floor before naming employment. A bare “800” with no comparison leaves the reasoning unshown.

8. (a) 9.45/1.06 [1] = 8.92 [1] [2] (b) (8.92 − 9.00)/9.00 = −0.9% [1] [1] (c) 9.45/15 = 63% [1] [1] Examiner insight: Deflate by the index divided by 100, not by subtracting it. State the base year of the real figure.

9. Employment −160/8,000 = −2% and wage +0.50/10 = +5%, so elasticity = −0.4 [1]. Wage bill 80,000 to 82,320 [1], a rise of 2.9% [1] [3] Examiner insight: Calculate the wage bill before and after and compare. Inferring the direction from the elasticity alone leaves the wage bill change unshown.

10. Ratio to median is 10/14 = 71% in R and 10/25 = 40% in S [1]. The floor affects far more workers and raises wage costs more in R [1]. If demand for labour is elastic, R loses more jobs [1]. In S the floor is below what most firms pay, so it has little effect on poverty or jobs [1] [4] Examiner insight: Compare the two regions explicitly, using the ratio, rather than describing one region only.

11. Credit for any eight, developed: pay rises for those in work cut poverty [1]; in a competitive market a floor above equilibrium causes unemployment [1]; if demand for labour is inelastic the wage bill rises, if elastic it falls [1]; under monopsony a floor can raise employment [1]; higher pay can raise productivity and retention [1]; firms may raise prices, cut hours or substitute capital [1]; the effect depends on the level relative to median and in real terms [1]; a reasoned judgement, such as that a moderate floor helps most [1] [8] Examiner insight: Weigh the points against each other and reach a judgement rather than listing effects.

Where marks are usually lost

• Treating every pay difference as discrimination.
• Using the supply curve instead of marginal cost when finding the monopsony or discriminating wage.
• Dividing a percentage change by the new value.
• Dropping the sign of an elasticity or not interpreting it.
• Drawing a floor below equilibrium and still showing unemployment.
• Ignoring the wage bill and gains to workers who stay in jobs.
• Ignoring monopsony when judging a minimum wage.
• Comparing wages across years without deflating.

Next steps

• Revise with the revision notes and the study guide.
• Check the OxfordAQA Economics hub and printable checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OxfordAQA International AS and A-level Economics (9640), specification version 1.2, sections 3.3.4.5 and 3.3.4.6, with section 3.5. First teaching September 2020, first AS exams May/June 2021, first A-level exams May/June 2022.