If the government decreases the payroll tax, then the equilibrium wage will and the
employment level will .
a. decrease, decrease
b. decrease, increase
c. increase, increase
d. increase, decrease
e. remain the same, decrease
A worker’s reservation wage is
a. the minimum wage a worker must receive to join the labor force.
b. the maximum wage a worker must receive to stay in the labor force.
c. the minimum wage a worker must receive to decide to receive public assistance.
d. the maximum wage a worker must receive to decide to receive public assistance.
e. the wage at which a worker will switch from part time to full time employment.
In a hedonic model, each worker’s utility, u, depends upon his consumption, c, and a
single job attribute, z. If z represents fatality risk, risk averse individuals’ indifference
curves will:
a. be relatively flat.
b. be relatively steep.
c. be perfectly inelastic in z.
d. be perfectly elastic in z.
e. be downward sloping.
Consider the situation depicted in Figure 4.2, where the worker experiences a decrease
in her wage. Her initial budget constraint is B0D, and following the decrease her new
budget constraint is B1D. The move from to is the substitution effect, and the move
from to is the income effect.
a. R, P, Q, R
b. R, Q, Q, P
c. Q, R, P, Q
d. P, Q, Q, R
e. R, P, P, Q
The war on poverty officially commenced in ______ but the first major battle was the
passage of the ______.
a. 1984; Food Stamp Act of 1964
b. 1984; Social Security Act of 1935
c. 1964; Food Stamp Act of 1964
d. 1964; Equal Pay Act of 1963
e. 1964; Social Security Act of 1935
Which of the following is NOT true of soft information?
a. Soft information cannot be measured by objective performance measures.
b. Work quality is an example of soft information.
c. Soft information cannot be proven in a court of law.
d. Soft information is verifiable.
e. Worker ability is an example of soft information.
Learning by doing
a. requires a worker to take a course.
b. occurs over informal conversations.
c. is only applicable to one specific type of job.
d. is always general training.
e. may be obtained as a by-product of the production process.
Suppose the substitution elasticity between capital and labor is -2.6%. What does this
imply about the demand for labor?
a. The long run demand for labor is relatively inelastic.
b. The long run demand for labor is relatively elastic.
c. The short run demand for labor is relatively inelastic.
d. The long run supply of labor is relatively inelastic.
e. The long run supply of labor is relatively elastic.
Formal training is training that
a. raises a worker’s productivity at all firms.
b. is only useful at one firm.
c. is only useful for one industry.
d. is planned, such as a training seminar.
e. is gained through information conversations.
Which of the following is not a necessary characteristic of an indifference curve?
a. Indifference curves slope downward.
b. Indifference curves are differentiable.
c. Indifference curves are convex.
d. Indifference curves of the same person cannot cross.
e. The negative of the slope of an indifference curve is the marginal rate of substitution.
What will be the (approximate) optimal level of schooling if the discount rate increases
to r = 0?
a. 1 year
b. 2 years
c. 3 years
d. 4 years
e. 5 years
When wages increase, the scale effect implies employment will, while the substitution
effect implies employment will.
a. decrease, increase
b. decrease, remain the same
c. remain the same, increase
d. increase, increase
e. decrease, decrease
What is the firm’s marginal-revenue product of labor?
a.
b.
c.
d. MRP = 3/L
e. MRP = 20
Pareto efficiency implies
a. everyone in the economy is equally well off.
b. there are no trades that would make someone be?0??0?er off without making
someone else worse off.
c. there are still trades that would make one party be?0??0?er off without making
someone else worse off.
d. transactions are still taking place in the economy.
e. there is always only one outcome that is efficient.
What is the worker’s real wage in 2002?
a. $20,488
b. $23,590
c. $35,000
d. $42,000
e. $70,000
Which of the following is a reason the Peter principle’s inefficient promotion practices
might occur?
a. asymmetric ignorance about workers’ true abilities
b. incentive problems
c. hierarchical management structures
d. tournament schemes
e. efficiency wages
In the working relationship of a boss, B, and a worker, W, which of the following is
NOT necessarily true?
a. W accepts authority when his behavior is determined by B‘s decisions.
b. B has formal authority if he has the right to veto a proposal and implement his own
plans.
c. B has real authority if he has the right to fire W.
d. W enters into an employment contract with B when W agrees to accept the authority
of B and B agrees to pay W a stated wage.
e. W can choose whether or not to accept an employment contract.
Which of the following is an example of a situation in which each worker’s ability is
public information and is observed by workers and firms?
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 a reason workers may NOT be assigned tasks based on their
comparative advantages?
a. significant indivisibilities
b. one worker may have an absolute advantage
c. a productivity gap between workers
d. assortative matching
e. a tournament scheme has been instituted
What is Sarah’s total utility if she works 8 hours and spends all her earned income but
not her initial wealth (assume her time endowment, T, is a day, so T = 24 hours)?
a. 11 utils
b. 72 utils
c. 100 utils
d. 101 utils
e. 150 utils
e canonical view of an internal labor market is NOT characterized by which of these
stylized properties?
a. The organization has a distinct and stable hierarchy of jobs.
b. Wages are attached to jobs rather than the workers who fill those jobs.
c. The workers’ actions are determined by a price and wage system.
d. Workers have lengthy careers at the firm along a job ladder where promotions
are often the result of seniority rather than performance.
e. The internal labor market is attached to the external labor market through ports
of entry and exit.
Which of the following is true about point Q on the indifference curve ?
a. It corresponds to the utility maximizing solution.
b. It represents a corner solution where the worker chooses to remain out of the labor
force.
c. It is not feasible given the constraints.
d. It satisfies the tangency condition.
e. A and D
Recent studies suggest that may _______ be responsible for the observed wage gap
between men and women.
a. actual experience
b. completely segregated firms
c. productivity differences
d. differences in educational attainment
e. fertility differences
The minimum wage was introduced in the United States as part of the ______ and
excluded workers in the ______ sector.
a. Fair Labor Standards Act of 1938; agricultural
b. Equal Pay Act of 1963; retail
c. Fair Labor Standards Act of 1938; production
d. Equal Pay Act of 1963; retail
e. Equal Pay Act of 1963; agricultural
Which of the following is NOT a true statement about the screening model?
a. Screening is conducted by employers.
b. Screening induces workers to reveal private information.
c. Screening is used to judge workers’ abilities.
d. Screening takes place before workers enter the labor market.
e. Screening exploits the strengths of some groups and the weaknesses of others.
What is Mark’s marginal utility of leisure, ?
a. 0.8 utils per hour
b. 1.1 utils per hour
c. 1.7 utils per hour
d. 2.5 utils per hour
e. 5.0 utils per hour
Suppose time periods are denoted t=1,2,3, . . . ,T, where t=1 is the beginning and t=T is
the end. The discount rate is 1/2. Each period the firm can hire a worker (who is
employed for a single period). If no worker is hired, profits are zero. The worker’s
reservation utility is $20. Upon employment, the worker chooses whether to exert effort
e=1 or e=0. His utility is where $c is his consumption and $40 is the
value of shirking. The level of effort is soft information. In each of the periods, the firm
produces output valued at $y(e) where and y(1)=$80. What is the
minimum wage that must be offered in order to attract orkers?
a. $10
b. $20
c. $40
d. $50
e. $80
Suppose time periods are denoted t=1,2,3, . . . ,T, where t=1 is the beginning and t=T is
the end. The discount rate is 1/2. Each period the firm can hire a worker (who is
employed for a single period). If no worker is hired, profits are zero. The worker’s
reservation utility is $20. Upon employment, the worker chooses whether to exert effort
e=1 or e=0. His utility is where $c is his consumption and $40 is the
value of shirking. The level of effort is soft information. In each of the periods, the firm
produces output valued at $y(e) where and y(1)=$80. What is the
minimum bonus that must be offered in order to motivate workers
a. $10
b. $20
c. $40
d. $80
e. $100
Which of the following would cause Brian to be willing to pay more to go to college?
a. His expected wage after graduation decreases to $110K.
b. His wage at the retail store increases to $6K.
c. His discount rate increases to 15%.
d. His discount rate decreases to 8%.
e. His wage during college increases to $30K.
Amanda is less likely to attend college if
a. she is older.
b. she expects to retire at an older age.
c. she values the future more than the present.
d. there is a low demand for college-educated workers.
e. she derives utility from attending classes.