If capital and labor are gross substitutes in production,
a. then the scale effect dominates.
b. then the substitution effect dominates.
c. then the scale and substitution effects are of equal magnitude.
d. then capital and labor must be used in a one to one ratio.
e. then capital and labor cannot be used at the same time
If comparable workers need to be paid $5 more an hour to bus tables than to be a
waiter, then:
a. the value of being a waiter is worth at least $5 for all workers.
b. the value of being a waiter is worth more than $5 for all workers.
c. the value of being a waiter is worth exactly $5 for all workers.
d. the value of being a waiter is worth at least $5 for some workers.
e. the value of being a busboy is worth $5 for all workers.
If there is turnover in the market,
a. a firm will pay the full cost of specific training.
b. a worker will pay the full cost of specific training.
c. a worker and firm will share the costs of specific training.
d. a firm will pay the full cost of general training.
e. a worker will pay the full cost of general training.
Which of the following is NOT an example of a screening mechanism?
a. reference letters
b. résumés
c. candidate testing
d. educational investments
e. interviews
Imposing a minimum wage
a. will always increase the monopsonist’s employment level.
b. will always increase the wage a monopsonist pays.
c. will always reduce the marginal cost of labor for a monopsonist.
d. will always increase the wage in a competitive market.
e. can reduce the monopsonist’s demand for labor if the wage is set too high.
An example of a worker adjusting along the extensive margin is when
a. a worker’s wage is increased, so he decides to work more.
b. a worker’s wage is increased, so he decides to work less.
c. a worker’s wage is decreased, so he switches to another job but works the same
number of hours.
d. a worker’s wage is decreased, so he leaves the labor force.
e. a worker’s wage is decreased, so he works more hours.
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. All else equal, a firm’s profit is _______
in
w and _______ in z.
a. increasing; increasing
b. increasing; decreasing
c. decreasing; increasing
d. decreasing; decreasing
e. constant; decreasing
Which of the following is true of hard information?
a. Hard information can be measured subjectively.
b. Hard information is inherently unverifiable.
c. Hard information is verifiable in court.
d. Hard information cannot be measured objectively.
e. Workers’ ability is an example of hard information.
Which of the following is NOT a channel through which premarket discrimination
operates?
a. Premarket discrimination can adversely affect a minority’s parents.
b. Premarket discrimination can operate through the formal schooling system.
c. Premarket discrimination can hinder certain groups from entering particular
occupations.
d. Premarket discrimination can have effects that are lifelong.
e. Premarket discrimination can operate through neighborhood effects.
Which of the following is NOT a principal characteristic of high-performance work
practices?
a. information sharing
b. training
c. a discernable chain of command
d. screening
e. problem-solving teams
Affirmative action _______ appear to be successful in achieving its intended goal of
increasing the employment of _______.
a. does; minorities but not women
b. does; minorities and women
c. does; women but not minorities
d. does not; women but not minorities
e. does not; minorities and women
In a model with turnover, when a worker quits the value of specific training is lost. This
could be avoided if
a. the firm pays for all training costs.
b. the firm forces the worker to always receive the same wage.
c. the firm refuses to pay for any type of training other than general training.
d. the firm pays the worker more in the second period.
e. the firm pays the worker less in the second period.
In an economy with two distinct sectors, the imposition of a minimum wage above the
competitive equilibrium wage in one of those sectors will NOT:
a. reduce the demand for labor in the minimum-wage sector.
b. cause workers to move to the non-minimum-wage sector.
c. increase employment in the non-minimum-wage sector.
d. decrease employment in the minimum-wage sector.
e. increase unemployment in the non-minimum-wage sector.
Which of the following is true of the coefficient of employer discrimination?
a. It is the severity of discrimination that ultimately prevails in the marketplace.
b. It approaches infinity if an employer is not prejudiced.
c. It translates the non-pecuniary taste for discrimination to monetary terms.
d. It is equal to infinity if a worker experiences discrimination.
e. It is less than zero if an employer is not prejudiced.
Suppose the wage for secretaries increases to . What is the equilibrium
compensating wage differential for farmers?
a. $10K
b. $25K
c. $50K
d. $55K
e. $60K
One of the key problems in the economics of discrimination is:
a. decomposing the differences into one part that reflects inherent productivity
differences and another that reflects discrimination.
b. determining what is an observable characteristic.
c. defining discrimination.
d. reconciling different measures of discrimination.
e. distinguishing between premarket and market discrimination.
Students in high school are generally paid the minimum wage. What is one explanation
for this?
a. Employers discriminate against young workers.
b. High school students are lazy.
c. Individuals who work while in high school have a very low MRP.
d. High school students have high turnover rates, so firms invest less in their training.
e. Young individuals are not qualified to effectively negotiate their wages.
Which of the following is, by definition, enforceable in a court of law?
a. an implicit contract
b. a relational contract
c. the Peter principle
d. an explicit contract
e. a Pareto optimal contract
Suppose the current level inputs is 20 units of capital and 10 units of labor. What is the
marginal rate of technical substitution (MRTS)?
a. 1
b. 2
c. 3
d. 4
e. 5
Which of the following is NOT a benefit of hierarchical organizational structure?
a. workers on each rank monitor those below them to limit shirking.
b. the scale of operations effect
c. high-performance work practices
d. ease of dealing with processing and communicating information to the final decision
makers
e. higher ability workers make more of an impact than lower ability workers
Which of the following is suggested by the risky worker hypothesis?
a. Risky workers have worse option values than safe workers.
b. Firms minimize downside risk by terminating employment contracts.
c. The worst outcome for a firm is earning small positive profits.
d. The firm breaks even if the safe worker is a diamond in the rough.
e. Workers have higher expected value in this model than in the efficiency wage model.
Assume that there are two types of workers: safe and risky. At the beginning of the first
period a firm must decide to hire a safe or risky worker. Safe workers have constant
ability worth $200 per period. There is a 50 percent chance a risky worker will have
ability worth $300 per period and a 50 percent chance a risky worker will have ability
worth $100 per period. What is the risky worker’s average productivity?
a. $100
b. $200
c. $300
d. $400
e. $500
What is the hold up problem?
a. The ability of a worker to negotiate a wage increase causes deadweight loss.
b. Sunk investments in firm specific training are vulnerable to exploitation by workers.
c. Sunk investments in general training are vulnerable to exploitation by firms.
d. Workers do not spend enough obtaining general human capital.
e. Firms overinvest in firm specific human capital.
The slope of the indifference curve in a hedonic wage model is the marginal rate of
substitution (MRS) between consumption and the non-wage job attribute.
Economically,
this MRS is:
a. the bribe that is necessary to completely compensate the worker for a unit increase
in the non-wage job attribute.
b. the increase in wage that a worker is willing to forgo for a 1 percent increase in
his fatality risk.
c. negative if the non-wage job attribute is a good.
d. always equal to zero at the worker’s utility maximizing point.
e. increasing with age.
Which of the following is not a positive statement?
a. The federal minimum wage was recently increased to $7.25.
b. Ceteris paribus, an increase in wages increases the quantity of workers supplied.
c. Minimum wage laws are not Pareto efficient.
d. An increase in the minimum wage hurts the profits of small businesses.
e. A decrease in the labor force due to the swine flu will cause the equilibrium wage to
increase.
Why might imperfect information lead employers to engage in discrimination?
a. Imperfect information does not actually lead employers to engage in discrimination
because employers may rely on screening and signaling in the presence of imperfect
information.
b. In the long run, firms do not learn from their mistakes.
c. In the long run, the wage effects of discrimination will be zero.
d. In the long run, firms will fail to form correct expectations if consumers are
discriminatory.
e. Competitive pressures force employers to use the information at their disposal
efficiently.
What is the employment rate?
a. 1.8%
b. 2.0%
c. 2.2%
d. 2.4%
e. 97.6%
The starting salary for a garbage hauler is about $60,000 more than a teacher. Which of
the following terms explains this difference?
a. Pareto optimal
b. payroll tax
c. reservation value
d. compensating wage differential
e. competitive Equilibrium
The coefficient of market discrimination is NOT:
a. equal to the gap between the employment of White and Black workers.
b. equal to the gap between the wages of White and Black workers.
c. equal to the proportionate gap between the employment of White and Black workers.
d. equal to the proportionate gap between the wages of White and Black workers.
e. a measure of the wage effects of discrimination.
Which of the following is NOT a true statement about isoquants?
a. Each curve represents the particular combinations of tasks that generate the same
quantity of output.
b. Isoquants are finite in number.
c. The absolute value of the slope is the marginal rate of technical substitution between
task 2 and task 1.
d. Isoquants differ in the quantity of output they represent.
e. The slopes of the isoquants represent how easy it is for the firm to substitute task 1
for task 2.