978-1259723223 Test Bank TBChap017 Part 4

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C. 2.

D. 1.

AACSB: Knowledge Application

Blooms: Understand

Dif f i c u l t y :

02 Medium

Learning Objective: 17–05 Explain why wages and employment are determined by collective

bargaining in a situation of bilateral monopoly.

Test Bank: I

Topi c :

Bilateral Monopoly Model

Type: Graph

109.

Refer to the labor market diagrams. The economic impact of occupational licensing can best be

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demonstrated through Figure

A. 4.

110.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply

curve, and MRC is the marginal resource (labor) cost curve. If this were a purely competitive

labor market, the equilibrium wage rate and level of employment would be

A. $5 and 3, respectively.

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AACSB: Knowledge Application

Blooms: Understand

Dif f i c u l t y :

02 Medium

Learning Objective: 17–04 Discuss how unions increase wage rates by pursuing the demand–

enhancement model, the craft union model, or the industrial union model.

Test Bank: I

Topi c :

Three Union Models

Type: Graph

111.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply

curve, and MRC is the marginal resource (labor) cost curve. If this were a monopsonistic labor

market, the equilibrium wage rate and level of employment would be

D. $8 and 3, respectively.

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Type: Graph

112.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply

curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was formed

and was able to get the monopsonist to agree to a $7 wage rate, then the monopsonist would

A. reduce employment from 5 to 3 workers.

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113.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply

curve, and MRC is the marginal resource (labor) cost curve. If an inclusive union was able to

get the monopsonist to pay a $6 wage rate, then

A. the supply curve would be perfectly elastic for the first four workers, but the MRC curve

would be unaffected.

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114.

Refer to the labor market diagram, where D is the labor demand curve, S is the labor supply

curve, and MRC is the marginal resource (labor) cost curve. An inclusive union could

increase the level of employment above that which the monopsonist would provide if it could

get the monopsonist to agree to any wage rate

A. below $7.

115. Minimum–wage legislation is less likely to have adverse effects on employment when the

D. demand for labor is relatively elastic.

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116. Critics of minimum-wage legislation argue that it

A. keeps inefficient producers in business.

117. Many economists are critical of the minimum wage because they believe that it

A. hurts the efforts of labor unions.

118. Unions might support a higher minimum wage because

A. their constitutions obligate them to do so.

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D. the minimum wage is better targeted than are alternative income-maintenance programs.

119. Critics of the minimum wage argue that as an antipoverty device, it is “poorly targeted.” By

this they mean that

A. the minimum wage only applies to a small percentage of the labor force.

120. If the minimum wage is set too high, in some labor markets we can expect to see

A. a shortage of labor.

121. According to some supporters of the minimum wage, it has very small or even nonexistent

negative employment effects because

A. the demand for minimum–wage labor is highly elastic.

122. If all workers were homogeneous, all jobs were equally attractive to workers, and labor

markets were perfectly competitive,

A. compensating differences would cause wage differentials.

123. Wage differentials may result from all the following except

A. differences in the nonmonetary aspects of various occupations.

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Topi c :

Wage Differentials

124. Suppose all workers are identical but working for Ajax is more pleasant than working for

Acme. In all other nonwage aspects, the two firms offer the same job characteristics. We would

expect

A. wage rates at Ajax to be higher than at Acme.

125. Noncompeting groups of workers are the result of

A. differences in the age-earnings profiles of workers.

126. Compensating differences in wages

A. compensate workers for differences in their human capital.

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D i f fic u lty :

01 Easy

Learning Objective: 17–07 List the major causes of wage differentials.

Test Bank: I

Topi c :

Wage Differentials

127. Compensating differences in wages pay workers for

A. differences in worker training and skills.

128. Which of the following factors is not relevant in explaining the persistence of wage

differentials?

A. labor immobility

129. The idea of compensating differences is used

A. by inclusive unions as an argument in bargaining for wage rate increases.

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A cc e s s i b i l i t y :

Keyboard Navigation

Blooms: Remember

D i f fic u lty :

01 Easy

Learning Objective: 17–07 List the major causes of wage differentials.

Test Bank: I

Topi c :

Wage Differentials

130. The concept of investment in human capital indicates that

A. union workers are better educated and more productive than nonunion workers.

131. Data on education and earnings reveal

A. negative age-earnings profiles for male workers.

132. According to age-earnings data,

A. lower-educated workers have similar earnings at age 65 as higher-educated workers.

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133. The earnings of highly educated workers

A. rise more slowly than those of less-educated workers.

134. Economists regard expenditures on education as investments because

A. they are subject to tax deductions at the same rate as are expenditures on machinery and

equipment.

135. Which of the following involves the creation of human capital?

A. The XYZ Corporation upgrades the machinery on its assembly line.

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C. Smith buys 30 shares of common stock.

D. A retired person decides to reenter the labor force.

136. Human capital is best defined as

D. the exchange of money for real assets.

137. Which of the following is a market imperfection that might explain persistent wage

differentials within an occupation?

A. movement of labor from lower-wage to higher-wage jobs

138. Which of the following is a market imperfection that might explain persistent wage

differentials within an occupation?

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A. geographical immobility of workers

B. readily available information about job opportunities and pay

C. principal-agent problems

D. compensating wage differentials

139. Which of the following is not an example of a market imperfection that might explain

persistent wage differentials within an occupation?

A. geographic immobility of workers

140. Jack and Jill have identical skills and training, but Jill earns higher wages in her job.

Which of the following reasons would best explain why Jill earns more than Jack?

D. Jill is reluctant to move to a new city because she wants to live near family.

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Topi c :

Wage Differentials

141. The principal-agent problem arises in labor markets because

A. a firm may realize excessively large profits.

142. The principal-agent problem arises primarily because

A. principals and agents share a common interest, leading to free-rider problems.

143. Which one of the following best exemplifies the principal-agent problem in the employer-

employee relationship?

D. A worker’s productivity is independent of the wage paid.

144. In the context of labor markets, shirking refers to

A. the nonmonetary disadvantages of certain jobs.

145. Traveling sales representative Harold Hill only calls on clients four days a week rather

than the five days expected by his employer. This is an example of

A. equalizing differences.

146. The idea of efficiency wages is that

A. the wages of each type of labor must be proportionate to their marginal products.

147. Paying an above-equilibrium wage rate might reduce unit labor costs by

A. permitting the firm to attract lower-quality labor.

148. Compensation paid in proportion to the number of units of personal output best describes

A. royalties.

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plans.

Test Bank: I

Topi c :

Pay for Performance

149. A firm might choose to pay its employees a wage higher than that which would clear the

market because

D. this policy reduces the proportion of experienced to inexperienced workers, resulting in a

lower overall wage bill.

150. For the firm, the major goal of profit sharing plans is to

A. force workers to incur some of the business risk.

151. Stock options as a form of payment are designed to

A. evade the equal-pay-for-equal-work provisions of the federal antidiscrimination law.

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B. boost the overall earnings of minimum-wage workers.

C. offset monopsony.

D. address the principal-agent problem.

152. One of the potential negative side effects of pay in the form of sales commissions is

D. an increased likelihood of shirking by workers.

153. (Consider This) The main idea highlighted in the story about artist Pablo Picasso is

A. derived demand.