Suppose there is a payroll tax placed on firms. If labor supply is perfectly elastic, then
a. firms and workers will split the payroll tax 50″50.
b. workers will bear 75% of the tax burden.
c. workers will bear 100% of the tax burden.
d. firms will bear 100% of the tax burden.
e. firms will bear 75% of the tax burden.
Which of the following is an accurate description of the Wessel’s effect?
a. Working productivity is linearly related to educational attainment.
b. Firms may attempt to undo the effects of an increase in the minimum wage by
reducing fringe benefits.
c. Hourly wages are equal to marginal productivity in a competitive environment.
d. The minimum wage will tend to increase employment in a monopsony environment.
e. Oligopoly conditions dampen the effect of a minimum wage.
Which of the following is consistent with a Pareto improvement?
a. a federal restriction on the hours an individual can work
b. there is an increase in the sales tax levied on particular goods
c. a trade that would make one party be?0??0?er off, and the other equally well off
d. a trade that would make one party be?0??0?er off, and the other party worse off
e. one party having incomplete information about the market
Which of the following is NOT an implication of the scale of operations effect?
a. The optimal hierarchical structure is pyramidal in shape.
b. The closer a worker is to the top of the hierarchy the greater the impact of his
performance.
c. The distribution of earnings is skewed to the left.
d. Higher-ability workers are optimally placed at the top of the hierarchy.
e. There is an unequal number of workers at each level.
According to the Pelzman effect, agents respond to inherent improvements in safety
by _______ their own safety efforts. So, increases in workplace safety can potentially
cause _______ in accidents.
a. increasing; an increase
b. increasing; a decrease
c. decreasing; an increase
d. decreasing; a decrease
e. leaving constant; an increase
Which of the following is an advantage of just-in-time production?
a. Productive tools are flexible or lean.
b. Homogeneous hiring allows firms to pay workers a homogeneous wage.
c. Fewer productive inputs are tied up in inventories.
d. This type of production calls for dramatic organizational restructuring.
e. Workers are induced to operate at comparatively higher levels of effort.
Which of the following is an example of asymmetric information in which workers
know their own abilities but firms do not?
a. a seasoned athlete
b. an established actor
c. a recent college graduate
d. an assistant professor
e. a high school student
When the price of labor increases,
a. a firm will increase the amount of capital used in the short run because it is cheaper.
b. a firm will increase the amount of capital used in the long run because it is cheaper.
c. a firm will decrease the amount of capital used in the long run because it is more
costly.
d. a firm will not change the amount of capital used in the long run because an increase
in the price of labor does not affect capital.
e. it is ambiguous how the firm will adjust the level of capital in the long run.
If the net private return of return does not equal the social return to investment, then
there exists a possibility for
a. arbitrage.
b. a Pareto improvement.
c. government intervention.
d. a private company to make a profit.
e. B and C
______ in the minimum wage could discourage schooling investments by making
education ______ attractive relative to work.
a. An increase; more
b. An increase; less
c. A decrease; more
d. A decrease; less
e. There is no causal relationship between the minimum wage and education.
The difference between a firm’s revenues and its total costs, including forgoing the next
best alternative, is called
a. accounting profits.
b. economic profits.
c. opportunity costs.
d. normal profits.
e. economic rent.
A monopsonist’s optimal employment level and wage rate are such that
a. MRP of labor equals the MC of labor, where the MC of labor is the elastically set
wage.
b. MRP of labor is greater than the MC of labor, where the MC of labor is the elastically
set wage.
c. MRP of labor equals the MC of labor, and that optimal level of labor is plugged into
the wage requirement schedule to calculate the optimal wage.
d. MRP of labor is greater than the MC of labor, and that optimal level of labor is
plugged into the wage requirement schedule to calculate the optimal wage.
e. none of the above
If an individual’s wage increases, it is theoretically ambiguous if the individual will
work more or less. Why?
a. The wealth effect will decrease the number of hours worked, but no one knows the
direction of the substitution effect.
b. The wealth effect has an ambiguous effect on the number of hours worked, but the
substitution effect will increase the number of hours worked.
c. Both the wealth effect and substitution effect have an ambiguous effect on earnings.
d. The wealth effect will increase the number of hours worked, but the
substitution effect will decrease the number of hours worked.
e. The wealth effect will decrease the number of hours worked, but the
substitution effect will increase the number of hours worked.
After the $4 subsidy is imposed, how many individuals work in the steel industry?
a. 19
b. 20
c. 23
d. 25
e. 27
What is Mark’s marginal utility of consumption, ?
a. 0.8 utils per dollar
b. 1.1 utils per dollar
c. 1.7 utils per dollar
d. 2.5 utils per dollar
e. 5.0 utils per dollar
Under an experience-rated workers’ compensation system, employers’ insurance
premiums
increase with:
a. the length of time the firm has existed.
b. the number of employees laid off in the past year.
c. the amount paid to workers for prior workplace injuries.
d. the number of prior workplace injuries.
e. the number of workers laid off every year.
Let and denote the respective abilities of worker A and worker B,
and let and . If worker A possess an comparative advantage
over worker B in task 1:
a. .
b. .
c. .
d. .
e. .
Which of the following is NOT a reason that the real value of the minimum wage
fluctuates considerably over time?
a. Sporadic changes to the nominal minimum wage.
b. Inconsistent enforcement of minimum wage legislation.
c. Inflation.
d. The political difficulty with which changes in the minimum wage occur.
e. Changes in prices over time.
In the principal”agent model, the shock ______ verifiable ex post and the agent’s effort
______ verifiable ex post.
a. is; is
b. is; is not
c. is not; is
d. is not; is not
e. may be; is
The National Compensation Survey (NCS), published by the Bureau of Labor Statistics,
is problematic. Which of the following is not one of the reasons it is problematic?
a. Rankings vary based on whether the hourly wage is used or the annual earnings.
b. The NCS is based on a sample, thus exposing it to sampling error.
c. The rankings are based on the median response, making it biased toward outliers.
d. Rankings are calculated using the mean wage, which biases the estimates.
e. The rankings vary because different occupations work a different number of hours.
The marginal product of labor tells us
a. which workers are least efficient.
b. the additional output an additional worker will add.
c. the increase in average output an additional worker will contribute.
d. the effect an additional worker will have on a firm’s accounting profits.
e. the effect an additional worker will have on a firm’s economic profits.
Instead of a wage increase, members of a police union agreed to keep the same pay in
exchange for a 20-year retirement program. What is this an exmaple of?
a. fringe benefits
b. Pareto optimality
c. efficiency
d. compensating wage differential
e. A and D
An individual’s age”earnings profile decreases over his lifetime. Which of the following
would explain this phenomenon?
a. On-the-job training stops completely after the first few years of work.
b. On-the-job training declines over an individual’s career.
c. Firms discriminate against older workers and pay them less since they are closer to
retirement.
d. The human capital he acquires over all those years of employment decreases his
productivity.
e. Workers cut back on hours to spend more time at home.
There are two tasks, 1 and 2, and two workers, A and B. The level of output, y, is
governed by the task-based production technology: where and denote
the respective amount of task 1 and task 2 that are carried out during the period. A‘s
ability is (8, 4), which represents the maximum amount of task 1 and task 2 he can
perform if he devotes all of his time to it. B‘s ability is (9, 9). Which worker has a
comparative advantage in task 1? Which worker has a comparative advantage in task 2?
a. A; A
b. A; B
c. B; A
d. B; B
e. neither; A
Why are injury and fatality rates endogenously determined in the hedonic framework?
a. The hedonic wage locus is responsive to changes in economic policy.
b. The hedonic wage locus is NOT responsive to changes in economic policy.
c. The hedonic wage locus describes all of the (w, z) pairs that are offered in
equilibrium and workers are NOT free to pick any pair that lies along the hedonic locus
because of their heterogeneous tolerances for risk.
d. The hedonic wage locus describes all of the (w, z) pairs that are offered in
equilibrium and workers are free to pick any pair that lies along the hedonic locus.
e. The hedonic wage is independent of workers’ tolerance for risk.
What is Mark’s marginal rate of substitution, MRS, between consumption and leisure?
a. 0.7 dollars per hour
b. 1.5 dollars per hour
c. 3.5 dollars per hour
d. 4 dollars per hour
e. 5.5 dollars per hour
Assume that a job package is characterized by the pair (w, z) where w is the wage, and z
is a single undesirable non-wage job attribute. A firm’s iso-profit curves:
a. are finite in number.
b. correspond to exactly zero economic profits.
c. represent a set of (w, z) pairs that yield a particular equal level of profits.
d. are convex to the origin.
e. are strictly increasing.
What is the marginal product of labor of the third worker?
a. 3
b. 4
c. 6
d. 8
e. 14
Suppose a firm uses three inputs in production, capital, labor, and land. If the price of
labor increases, the firm adjusts by decreasing the amount of labor used, increasing the
amount of capital used and decreasing the amount of land used. What does this imply
about the relationship between the three inputs?
a. Land and labor are net substitutes while labor and capital are net complements.
b. Land and labor are net complements while labor and capital are net substitutes.
c. Land and labor are gross substitutes while labor and capital are gross complements.
d. Land and labor are gross complements while labor and capital are gross substitutes.
e. none of the above
If training is efficient, then it will be carried out and pay for investments.
a. workers, specific
b. workers, general
c. firms, formal
d. firms, informal
e. firms, general
If employers as a group hold negative stereotypes concerning the productivity of
minority workers, these stereotypes may:
a. break the connection between market and premarket discrimination.
b. transform into a positive coefficient of employer discrimination.
c. be found to be false in the long run.
d. be self-confirming because these beliefs diminish the incentives for minority workers
to accumulate costly skills.
e. be driven out of existence in the long run.
If workers are perfectly mobile, what will be the wage of the chef at the fancy
restaurant?
a. $5
b. $6
c. $7
d. $8
e. $9
Which of the following is an example of general training?
a. A worker takes a course on how to use Excel, a commonly used program.
b. A mechanical engineer takes an advanced graduate course in engineering.
c. Two workers have a discussion about how to best use a new machine in the office.
d. An accounting student studies for the CPA.
e. A college student interested in medicine volunteers at a hospital.
Which of the following is NOT true about workers’ compensation?
a. Workers’ compensation is a no-fault scheme.
b. Injured workers receive benefits but are not allowed to sue their employers.
c. Workers’ compensation is most frequently filed for permanent partial claims.
d. Premiums paid by firms are experience rated.
e. There is a minimum level of premium paid by all firms.
Given the information just provided, which of the following statements is true?
a. If wages increased by $1, there would be an excess demand of 7 workers.
b. If wages increased by $1, there would be an excess supply of 5 workers.
c. If wages decreased by $1, there would be an excess demand of 5 workers.
d. If wages decreased by $1, there would be an excess supply of 7 workers.
e. none of the above