Sharon will invest in another year of school if one more year of school costs
a. $20
b. $26
c. $30
d. $50
e. all of the above
Suppose the labor demand curve shifts downward. Which of the following could have
caused the shift?
a. The wage in an alternative industry decreases.
b. The price of capital increased, and capital and labor are gross complements.
c. The price of capital decreased, and capital and labor are gross complements.
d. A hurricane causes thousands of people to leave New Orleans, decreasing the size of
the labor force in the area.
e. none of the above
Which of the following increases the power of unions?
a. Deregulation of an industry, removing a firm’s monopoly power.
b. An increase in the tariff on foreign inputs.
c. An elastic demand curve.
d. An increase in the price elasticity of demand for the industry’s product.
e. The firm not agreeing to a set number of union workers that it must employ (manning
levels)
The cost sharing arrangement is when:
a. a worker initially pays for training and then receives higher wages.
b. a firm initially pays for training and then the worker receives higher wages.
c. a worker initially pays for training and then receives lower wages.
d. a firm initially pays for training and then the worker receives lower wages.
e. firms cover the entire costs of training and a worker receives his MRP.
Which of the following is NOT a plausible result of an increase in the generosity of
benefit payments received under workers’ compensation laws?
a. The proportion of fraudulent to legitimate claims will increase.
b. Employers will attempt to entice their workers back to work earlier.
c. Employers will employ more lax workplace safety standards.
d. Workers will increase the time spent out of work.
e. Employers will hire fewer workers.
Recent studies have focused on rather than as an explanation for differential outcomes
of Black and White workers.
a. systematic differences that Black and White children face in school quality and
human capital accrued within the family; labor-market discrimination
b. systematic differences that Black and White children face in school quality and
human capital accrued within the family; premarket discrimination
c. productivity differences; the aggregate wage gap productivity differences; the
aggregate wage gap
d. productivity differences; premarket discrimination
e. productivity differences; labor-market discrimination
If one party can gain from a transaction, without harming any other party,
a. then the transaction must be a Pareto improvement.
b. then the transaction is not a Pareto improvement.
c. the government must intervene to make the transaction occur.
d. the transaction will be forced on one of the parties.
e. then the current economy is at the Pareto efficient outcome.
A monopolist’s short run labor demand curve
a. is always equal to the firm’s long run labor demand curve.
b. is above the marginal product of labor curve.
c. is below the marginal product of labor curve.
d. equals the marginal product of labor curve.
e. is always half the firm’s long run labor demand curve.
The minimum wage was introduced in the United States as part of the:
a. Fair Labor Standards Act of 1938.
b. Social Security Act of 1952.
c. Equal Pay Act of 1963.
d. Civil Rights Act of 1964.
e. Oaxaca decomposition.
What is the worker’s nominal wage in 2002?
a. $20,488
b. $23,590
c. $35,000
d. $42,000
e. $70,000
Which of the following is NOT a reason the incentive effects of OIP schemes are
difficult to measure?
a. Cross-sectional data inherently involves comparisons of different workers at the same
point in time.
b. It is impossible to discern whether the observed earnings differences in cross
sectional data result from incentives to work harder or from systematic unobserved
differences in workers who select into different earnings schemes.
c. Theoretically, workers with higher abilities will tend to select into OIP schemes.
d. Workers with higher ability are able to produce more output.
e. Workers do not increase effort under OIP schemes.
Suppose there is another worker in the economy, whose schooling and earnings are
governed by w = 3 ln (1 + s). This worker will accumulate years of school and is of
ability.
Hint: in this case, MW(s) = 6.3/(1 + s)
a. more, higher
b. more, lower
c. less, higher
d. less, lower
e. the same, equal
The neoclassical consumption-leisure model predicts that the AFDC and TANF
programs:
a. unambiguously decrease work incentives.
b. unambiguously increase work incentives.
c. may increase or decrease work incentives.
d. increase work incentives for women without children but have no effect for women
with dependent children.
e. increase work incentives for men but not for women.
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 (10, 1), 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 (6, 3). What is the opportunity
cost of performing task 1 in terms of task 2 for worker A?
a. 4
b. 10
c. 1
d. 0
e. 1/10
Which of the following is an example of symmetric information in which both workers
and firms are uninformed about workers’ true abilities?
a. a seasoned athlete
b. a young soccer player
c. a recent college graduate
d. an assistant professor
e. a high school student
Which of the following is NOT a true statement about relational contracts?
a. A relational contract has unenforceable elements.
b. A relational contract must be self-enforcing in order to be effective.
c. In order to work, a relational contract must have long-term benefits of adhering to the
contract that are greater than the short-term gains of breaking the contract.
d. A relational contract is based on reputation.
e. A relational contract includes only verifiable information.
In the principal-agent model, output ______ verifiable ex post and the price verifiable
ex post.
a. is; is
b. is; is not
c. is not; is
d. is not; is not
e. may be; is
Suppose instead of the subsidy, the government imposes a tax on workers of $4 per
hour. What is the new equilibrium wage in the steel industry?
a. $8
b. $9
c. $10
d. $13
e. $15
In the short run,
a. firms can adjust level capital and labor.
b. firms can adjust the level of capital but not labor.
c. firms can adjust the level of labor but not capital.
d. firms can not adjust capital or labor.
e. wages and product prices cannot change.
After 9/11 there was an increase in the number of people who became police officers
and firemen. What does this imply about the labor market?
a. The quantity of labor supplied increased, and wages will increase.
b. The quantity of labor supplied increased, and wages will decrease.
c. The labor supply increased, and wages will increase.
d. The labor supply increased, and wages will decrease.
e. The labor supply increased, and wages will not change.
Stevens (1999) finds that ______ of Whites who enter poverty this year will see their
incomes fall below the poverty line in 5 out of the next 10 years of their lives.
a. 1 percent
b. 10 percent
c. 30 percent
d. 50 percent
e. 99 percent
Which combination of wages and rental rates would fulfill the
“equal-bang-for-the-buck” condition?
a. rental rate = $2, wage = $3
b. rental rate = $3, wage = $2
c. rental rate = $1, wage = $1
d. rental rate = $4, wage = $1
e. rental rate = $1, wage = $4
There are two tasks, 1 and 2, and two workers, A and B. The level of output, y, is
overned 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). What is the opportunity
cost of performing task 1 in terms of task 2 for worker A?
a. 4
b. 2
c. 1
d. 1/2
e. 1/4
Under the Roy model, each worker self-selects into a job on the basis of ______ and
______.
a. comparative advantage; the prevailing prices in the market
b. single-dimension ability; the prevailing prices in the market
c. his bundle of skills; ability-unadjusted productivity
d. comparative advantage; ability-unadjusted productivity
e. single-dimension ability; his comparative advantage
Why will active government policy to increase workplace safety reduce overall
welfare?
a. According to the assumptions of the hedonic wage model, there are a finite number of
iso-profit curves.
b. Workers have incomplete information about workplace safety.
c. According to the assumptions of the hedonic wage model, the competitive market
provides an efficient level of workplace safety.
d. Firms will attempt to get around the government’s policy.
e. Firms will go out of business.
How do economists estimate the value of a statistical life?
a. The value of a statistical life is equal to the slope of the hedonic wage locus, so
economists estimate the hedonic wage locus.
b. The value of a statistical life is modeled using survey information from large samples
of representative workers.
c. The value of a statistical life is determined by the median wage.
d. The value of a statistical life is equal to the intersection of the hedonic wage locus
and the representative workers’ iso-profit curve, so economists estimate the hedonic
wage locus.
e. The value of a statistical life is estimated using the point of tangency between
workers’ iso-profit curves and firms’ job package offers.
Michael Spence posits that high-ability workers are able to choose just the right amount
of education to signal that they are high-ability because:
a. high-ability workers find it less costly to acquire education than low-ability workers.
b. high-ability workers have greater productivity gains from education than low-ability
workers.
c. employers value education in and of itself.
d. high-ability workers enjoy school more than low-ability workers.
e. low-ability workers value leisure more than high-ability workers.
Suppose that male, m, and female, f, wages depend upon q, a perfect measure of
productivity, according to and . Let the wage gap
between men and women be equal to . Wage discrimination against
women exists if:
a. and .
b. and .
c. and .
d. and .
e. and .
If the price of labor increases, the labor will.
a. demand for, increase or decrease
b. demand for, increase
c. quantity demanded of, decrease
d. quantity demanded of, increase
e. quantity demanded of, increase or decrease
Graphically, when considering the effect of an increase in wealth, the wealth effect is a
and the substitution effect is a .
a. movement along a new indifference curve, movement along the initial indifference
curve
b. movement along a new indifference curve, change in the budget constraint.
c. change in the budget constraint, movement along a new indifference curve
d. movement along the initial indifference curve, change in the budget constraint
e. change in the budget constraint, movement along the initial indifference curve
The value of the minimum wage has declined markedly since ______ and today its real
value is approximately ______ what it was over half a century ago.
a. the 1950s; 75 percent of
b. the 1950s; equal to
c. the mid-1970s; equal to
d. the 1980s; 75 percent of
e. the 1980s; equal to