A worker will not participate in the labor market when
a. the MC of work equal the MB.
b. when the MB of work are greater than the MC.
c. where .
d. where .
e. where .
A worker’s wage increases over the course of her career for which type of training?
a. formal
b. informal
c. general
d. specific
e. on-site
Which of the following is an example of changes along the intensive margin?
a. A firm hires more workers because demand for the good has increased.
b. A new firm closes because a recession causes sales to drop too low.
c. A worker leaves her job to stay at home with her children.
d. After the iPhone was developed, several competitors entered to earn a profit.
e. Consumers demand more high-definition TVs, so the price of other types of
TVs decreases.
According to the human-capital investment framework,
a. higher ability workers choose to invest more in human capital.
b. education increases productivity, which increases wages.
c. education does not affect productivity.
d. education affects wages by indicating a worker has more innate abilities.
e. workers who choose to attend college are not maximizing their expected lifetime
earnings.
The ratios of full-time earnings of Black men and women relative to White men have
increased sharply over the past _______years. Some economists have suggested that
this improvement stems from, among other reasons, _______.
a. 20; laws designed to combat discrimination
b. 100; laws designed to combat discrimination
c. 50; the tight labor market of the 1960s
d. 40; the decreased educational attainment of White men
e. 100; the tight labor market of the 1980s
Why are there differing results in problems 22 and 23?
a. The average worker changed.
b. The marginal worker changed.
c. The median worker changed.
d. Individuals are not behaving rationally.
e. Employers are not profit-maximizing.
If a budget constraint is kinked, budget sets lead to a clustering of equilibrium points,
while budget sets lead to divergence.
a. convex, convex
b. concave, concave
c. convex, concave
d. concave, convex
e. linear, convex
The competitive equilibrium is
a. fair.
b. efficient.
c. equitable.
d. unaffected by shifts in labor demand.
e. unaffected by shifts in labor supply.
Suppose a risk-neutral firm hires many risk-averse workers for two periodsex ante and
ex post. Half of the workers possess high ability, , and the other half possess low
ability, . Worker ability is revealed ex post. A worker’s lifetime utility is given by
where and are consumption in each of the periods. The firm
offers contract where is the first period wage and and are the
respective second period wage offers made to high- and low-ability workers. The labor
market is competitive ex ante. Assume , , and . What is
the expected utility if the firm ignores insurance concerns?
a.
b. 10
c.
d.
e.
The poverty rate in the United States was in ______ 2007, ______ since
a. 12.5 percent; an increase
b. 22 percent; an increase
c. 12.5 percent; a decrease
d. 22 percent; a decrease
e. 25 percent; an increase
Which of the following is necessarily true of the piece-rate contract, ?
a. , where e is a worker’s effort.
b.
c.
d. is the piece rate.
e. Total output need not be verifiable.
What is the equilibrium wage rate for a monopsonist?
a. $20
b. $30
c. $50
d. $80
e. $90
The _______ sought to ensure equal pay for equal work.
a. The Equal Pay Act of 1963
b. The Civil Rights Act of 1964
c. Executive Order 11246
d. The Civil Rights Act of 1991
e. The Equal Rights Act of 1991
For training, workers receive their MRPs during the early stages of their careers, but for
training, they receive less than their MRPs during the latter stages.
a. general, specific
b. general, general
c. specific, general
d. specific, specific
e. informal, formal
According to Kerr’s folly,
a. workers will neglect duties that are not tied directly to their compensation.
b. firms that discriminate have lower profits than do firms that do not discriminate.
c. low-ability workers will attempt to pass themselves off as high-ability workers.
d. teachers will cheat on standardized tests because their compensation is tied to
students’ test scores.
e. low-ability workers produce as much output as high-ability workers under an OIP
scheme.
When wages increase,
a. the scale and substitution effects counteract each other and the firm’s demand for
labor remains the same.
b. the scale and substitution effects move in the same direction and the firm’s demand
for labor decreases.
c. the scale and substitution effects move in the same direction and the firm’s demand
for labor increases.
d. the scale and substitution effects move in opposite directions and the firm’s demand
for labor decreases.
e. the scale and substitution effects move in opposite directions and the firm’s demand
for labor increases.
Suppose the government decreases the federal income tax. What happens to the labor
market equilibrium?
a. The labor demand schedule shifts downward.
b. The labor demand schedule shifts upward.
c. The labor supply schedule shifts downward.
d. The labor supply schedule shifts upward.
e. The labor demand and labor supply schedule both shift downward.
An endogenous variable
a. is the independent variable in an economic model.
b. is assumed to be determined by factors outside the scope of the model.
c. is the impulse that causes a change in the exogenous variable.
d. is the response to a change in the exogenous variable.
e. is the rental rate of capital in the labor demand equation.
Total compensation includes all of the following except
a. base salary.
b. overtime.
c. opportunity cost of an alternative job.
d. health care.
e. a company car.
Who governs the compensating differential?
a. the employer
b. the average worker
c. the marginal worker
d. the median worker
e. the government
Suppose a competitive labor market is populated by equal numbers of high-ability (H)
and low-ability (L) workers. Each high-ability worker produces output valued at $100
and each low-ability worker produces output valued at $20. Without job market
signaling, the equilibrium wage will be:
a. $20.
b. $40.
c. $50.
d. $60.
e. $100.
If the average earnings of high school and college students declines, then the number of
people attending college will:
a. increase.
b. decrease.
c. remain the same.
d. increase only among individuals with high natural abilities.
e. decrease only among individuals with high natural abilities.
Which of the following is NOT necessarily true of the piece-rate contract,
?
a. , where p is the price of each unit of output.
b.
c. is the base rate.
d. y is the worker’s total output.
e. Total output need not be verifiable.
If wages are $3, the number of workers the firm will hire to maximize profits is
a. 1
b. 2
c. 3
d. 4
e. 5
Suppose Daniel can work in an unsafe factory for $15, but works in a restaurant as a
busboy for $11. What is the reservation value of safety?
a. $4
b. $9
c. $11
d. $13
e. $26
If capital markets are , then higher educational investment by an individual’s parents
will the optimal level of schooling.
a. imperfect, decrease
b. imperfect, remain the same as
c. perfect, increase
d. perfect, decrease
e. perfect, remain the same as
What is the equilibrium level of employment?
a. 7
b. 8
c. 9
d. 10
e. 11
A mathematical model
a. contains only exogenous variables.
b. treats endogenous variables as given.
c. seeks to explain exogenous variables.
d. does not clearly define the assumptions of the model.
e. reaches conclusions using logically sound methods.
What are the two major limitations of objective incentive payment (OIP) schemes?
a. OIP schemes encourage an emphasis on quantity at the expense of quality and the
firm must use costly monitoring technology.
b. Most professions have output that is easy to quantify and the firm must use costly
monitoring technology.
c. OIPs encourage shirking and the firm must use costly monitoring technology.
d. OIP schemes do not encourage productivity as much as wages do and the firm cannot
measure subjective quality.
e. OIPs encourage an emphasis on quantity at the expense of quality and the firm
cannot measure subjective quality.
In the principal-agent model, the standard deviation of the expected value of effort:
a. decreases with the riskiness of the outcome.
b. captures the inherent riskiness of the environment.
c. is equal to zero.
d. is proportional to the marginal disutility of effort.
e. is increasing in a worker’s ability.
Which of the following is an example of cream skimming?
a. hiring workers of a certain religion because they are thought to be hard workers
b. admitting only the best students to a new charter school for the underprivileged in
order to have better average test scores
c. awarding prizes to top performers
d. creating a tournament scheme in order to induce workers to exert higher effort
e. teachers cheating on standardized tests because their compensation is tied to students’
test scores
A competitive firm’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.
What is one of the reasons that the effects of market and premarket discrimination are
intertwined?
a. The workers who are most likely to be discriminated against have, on average, the
parents that most likely faced discrimination in the past.
b. The anticipation of future discrimination affects current actions.
c. Children’s outcomes are independent of their parents’ characteristics.
d. A worker can suffer from both occupational and earnings discrimination.
e. Premarket discrimination operates through more than one channel.