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d.
a tournament.
231. Studies have shown that union workers earn about
a.
10 to 20 percent more than nonunion workers in similar jobs.
b.
10 to 20 percent less than nonunion workers in similar jobs.
c.
40 to 50 percent more than nonunion workers in similar jobs.
d.
40 to 50 percent less than nonunion workers in similar jobs.
232. A union's major source of power is its
a.
high-profile leadership.
b.
ability to increase productivity.
c.
ability to threaten a strike.
d.
ability to deny employers the opportunity to bargain over wages.
233. The market wage could be higher than the equilibrium wage if a worker
a.
is a superstar.
b.
belongs to a labor union.
c.
has more human capital.
d.
All of the above are correct.
234. Sometimes wages are set above the equilibrium level when
a.
garbage collectors earn higher wages than secretaries due to compensating differentials.
b.
accountants earn more than dental technicians due to higher educational requirements.
c.
movie superstars earn more than talented plumbers.
d.
unions negotiate higher wages by threatening to strike.
235. Which of the following is not an example of efficiency wages?
a.
More productive workers are paid more to reflect their higher output.
b.
Higher wages induce higher output from workers.
c.
Better quality applicants apply for jobs that pay above-equilibrium wages.
d.
Workers are less likely to leave jobs that pay above-equilibrium wages.
236. Which theory explains the fact that some firms may choose to pay their employees more then they would earn as
determined by equilibrium in the labor market?
a.
the theory of efficiency wages
b.
the marginal-productivity theory
c.
human-capital theory
d.
signaling theory
237. If an employer's behavior is supportive of the theory of efficiency wages, the employer would
a.
raise wages in an effort to increase worker effort.
b.
raise wages in an effort to increase worker turnover.
c.
decrease wages in an effort to increase worker effort.
d.
decrease wages in an effort to increase worker turnover.
238. The theory of efficiency wages suggests that firms may pay above-equilibrium wages
a.
to reduce employee turnover.
b.
to prevent unions from recruiting members.
c.
to reduce the need for minimum wage laws.
d.
to increase the demand for better-skilled workers.
239. How does the theory of efficiency wages explain above-equilibrium wages?
a.
Employers are forced by competition to pay higher wages in efficient markets.
b.
Employers give their workers a higher wage in the hope that it will lead to increased productivity.
c.
Workers get higher wages when they prove they are increasing their productivity.
d.
Workers demand higher wages to compensate for poor fringe benefits.
240. The theory of efficiency wages asserts that
a.
employers set wages based on each employee’s productivity.
b.
employers strive to hold wages below equilibrium levels.
c.
employers may find it profitable to pay above-equilibrium wages.
d.
efficient workers actually earn lower wages than those earned by inefficient workers.
241. The theory of efficiency wages challenges the assumption that
a.
workers are efficient.
b.
workers have an incentive to shirk their responsibilities to their employers.
c.
wages must always adjust to balance labor supply and labor demand.
d.
firms sometimes choose to pay their workers above-equilibrium wages.
242. In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was significantly higher than
what any other organization offered. Henry Ford believed that this wage would make his employees happier, increase
their productivity, and lower employee turnover. Economists would say that Mr. Ford offered his employees
a.
a union.
b.
an efficiency wage.
c.
a diminishing rate of marginal return.
d.
a leisure wage.
243. The idea of paying workers an efficiency wage is that
a.
employers will find it profitable to hire more workers.
b.
workers receive wages consistent with their specific compensating differentials.
c.
workers and management gain at the expense of the stockholders of the company.
d.
workers have the incentive to work harder, thus increasing their marginal productivity.
244. Which of the following sets of circumstances is likely to provide the best evidence in support of the theory of
efficiency wages?
a.
Workers in the market are unskilled and not represented by a union, and their wage exceeds both the
equilibrium wage and the minimum wage.
b.
Workers in the market are highly skilled and not represented by a union, and their wage exceeds the minimum
wage.
c.
Workers in the market are highly skilled and represented by a union, and their wage exceeds the equilibrium
wage.
d.
Employers in the market are known for reducing the workers' wage whenever they get an opportunity to do so.
245. The theory of efficiency wages suggests that
a.
above-equilibrium wages increase worker productivity.
b.
workers with higher levels of education earn more than workers with lower levels of education.
c.
workers signal their high ability to potential employers by completing formal years of schooling.
d.
union workers earn more than nonunion workers.
246. Most wage differences can be understood while maintaining the assumption of equilibrium in the labor market. We
deviate from that assumption, however, when we consider
a.
the superstar phenomenon.
b.
the theory of efficiency wages.
c.
compensating differentials.
d.
differences in educational attainment.
247. Bob, the manager and owner of a small company, believes in the theory of efficiency wages. As such, Bob would be
most likely to agree with which of the following quotes?
a.
“The only place where success comes before work is in the dictionary.”
b.
“Work hard. Play harder.”
c.
“Pay a man for the job you want him to do.”
d.
“Imagination is more important than knowledge.”
248. The market wage could be higher than the equilibrium wage if a worker
a.
belongs to a labor union.
b.
is covered by a minimum-wage law.
c.
is paid an efficiency wage.
d.
All of the above are correct.
249. Which of the following would both make a worker’s wage higher than otherwise?
a.
the work is safe, the employer pays an efficiency wage
b.
the work is safe, the employer does not pay an efficiency wage
c.
the work is dangerous, the employer pays an efficiency wage
d.
the work is dangerous, the employer does not pay and efficiency wage
250. Which of the following moves the wage above its equilibrium value?
a.
both compensating differentials and efficiency wages
b.
compensating differentials but not efficiency wages
c.
efficiency wages but not compensating differentials
d.
neither compensating differentials nor efficiency wages
251. Jay was just drafted by a professional baseball team, and was offered a record-breaking contract because of his
potential. This is an example of
a.
a human capital differential.
b.
a compensating differential.
c.
signaling theory.
d.
the superstar phenomenon.
252. Matthew just graduated from culinary school. He can earn $40,000 a year working for the same local bakery he has
worked at since before starting culinary school, or accept a job offer he received after graduation from a high-end
restaurant paying $70,000 a year. The higher salary is a result of
a.
a compensating differential.
b.
efficient union bargaining.
c.
having more human capital.
d.
pure luck.
253. Paul and David work for the same company and have the same job title, education, work experience, and are equally
skilled at what they do. Paul works the night shift and is paid $60,000 a year, while David works a regular day shift and is
paid $55,000 a year. Which of the following is the best explanation for why Paul earns more than David?
a.
Paul has more human capital than David.
b.
David has more human capital than Paul.
c.
Paul has received a compensating differential.
d.
Aside from pay, the night shift is more desirable than the day shift.
254. Which of the following would be considered an investment in human capital?
a.
switching to working the night shift to receive a higher wage
b.
buying a new computer
c.
enrolling in a three-week course to learn more about a specific topic in your line of work
d.
quitting a job for health reasons.
Figure 19-6
255. Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market
wage is $15. If a labor union forms within the widget industry and subsequently negotiates an hourly wage of $20.00, then
there will be an
a.
excess demand of 50 labor hours.
b.
excess demand of 20 labor hours.
c.
excess supply of 20 labor hours.
d.
excess supply of 50 labor hours.
256. Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market
wage is $15. If a labor union forms within the widget industry and subsequently negotiates an hourly wage of $20.00, how
many hours of labor will be demanded by the widget industry?
a.
20 labor hours.
b.
30 labor hours.
c.
60 labor hours.
d.
80 labor hours.
257. Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The market equilibrium
wage is $15. If the minimum wage in the economy is $10, how many hours of labor will be demanded from firms in the
widget industry?
a.
0
b.
10
c.
60
d.
90
258. Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market
wage is $15. Suppose a labor union forms and subsequently negotiates an hourly wage of $20.00. Which of the following
statements about the impact of the union's formation on labor hours demanded is true?
a.
Labor hours demanded by widget firms will decrease by 20 hours.
b.
Labor hours demanded by widget firms will decrease by 30 hours.
c.
Labor hours demanded by widget firms will increase by 20 hours.
d.
Labor hours demanded by widget firms will increase by 30 hours.
259. Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market
wage is $15. Suppose a labor union forms and subsequently negotiates an hourly wage of $25.00. Which of the following
statements is true?
a.
Widget workers benefit from having a higher wage.
b.
Widget firms benefit from receiving a higher profit.
c.
Widget firms will not hire any workers as a result.
d.
There is no impact on the labor market from the higher negotiated wage.
