If a firm makes adjustments to create a safer working environment, then
a. workers will demand higher wages.
b. workers will accept lower wages.
c. the firm will attract more skilled workers.
d. the firm is no longer maximizing profits.
e. answers B and D
The working population is composed of two mutually exclusive groups
a. over 16 and under 16.
b. in the labor force and not in the labor force.
c. employed and unemployed.
d. in the labor force and unemployed.
e. under 16 and in the labor force.
Which of the following is a true statement about competitive labor markets?
a. Fringe benefits will never arise in a competitive labor market.
b. Workers of the same skill level will earn different prices.
c. Payroll taxes are levied on employees.
d. Adjustments along the intensive margin arise when firms enter the market.
e. In a competitive labor market, all participants are price takers.
Suppose a worker can earn $25,000. He obtains specific training, raising his value by
$10,000. If the worker can negotiate after the training, which of the following may be
his wage?
a. $15,000
b. $20,000
c. $25,000
d. $30,000
e. $40,000
What is the individual’s optimal level of schooling?
a. 2 years
b. 3 years
c. 4 years
d. 5 years
e. 6 years
Which of the following is NOT a principal characteristic of high-performance work
practices?
a. homogeneous pay
b. training
c. problem-solving teams
d. screening
e. information sharing
Suppose the state government increases the payroll tax by $1. What will happen 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.
Which of the following is not a great labor market institution involved in accumulating
human capital?
a. the government
b. the family
c. schools and college
d. the Internet
e. firms
During 2008, the number of marginally attached workers, while the unemployment
rate .
a. stayed the same, increased
b. increased, increased
c. decreased, increased
d. stayed the same, stayed the same
e. stayed the same, decreased
If it is costly for a firm to adjust its employment level rapidly, the firm faces
a. a positive labor demand elasticity.
b. linear adjustment costs.
c. concave adjustment costs.
d. convex adjustment costs.
e. lumpy adjustment costs.
The poverty line in the United States is NOT:
a. anchored to the Consumer Price Index.
b. determined according to a relative standard.
c. based on a formula proposed in 1963.
d. based on dietary plans developed by the Department of Agriculture.
e. designed so that those designated as in poverty spend 1/3 of their income on food.
If a firm incurs high fixed costs to adjust employment but there is almost no effect on
the MRP of labor, the firm faces
a. a positive labor demand elasticity.
b. linear adjustment costs.
c. concave adjustment costs.
d. convex adjustment costs.
e. lumpy adjustment costs.
Workers in an industry are probably overpaid if
a. firms want to hire more workers but cannot ?0??7?nd people willing to work.
b. firms need to layoff workers because it cannot afford to cover costs.
c. firms are hiring the optimal amount of workers and there is no excess supply of labor
in the market.
d. firms are unable to keep their most skilled workers.
e. no new workers are interested in working in that industry.
If capital markets are imperfect, high borrowing costs the acquisition of human capital
but the rate of return.
a. encourage, increase
b. encourage, depress
c. remain the same, depress
d. discourage, increase
e. discourage, decrease
Which of the following is NOT a correct statement about the coefficient of employee
discrimination?
a. It captures the psychic reduction in utility that a prejudiced worker experiences as a
result of working with minority workers.
b. If all White workers are prejudiced, employers will be racially segregated.
c. A given worker is unprejudiced if his coefficient of employee discrimination
approaches zero.
d. The effect of this coefficient on market wages is expected to be zero in the long run.
e. If all White workers are prejudiced, there will be market wage discrimination.
Why might an employer use an incentive scheme rather than attempt to measure worker
productivity?
a. Worker productivity can be determined by objective measures.
b. It is inexpensive to determine worker productivity over time.
c. Worker productivity is not based on effort.
d. Worker productivity is subjective.
e. Worker productivity is an example of hard information.
Which of the following is not true about specific training?
a. The wage is constant for both the incumbent firm and the spot market firm.
b. The initial wage of an individual has no relationship to the costs of training.
c. In the early stages of his career, a worker earns his MRP.
d. Late in her career, a worker still earns his MRP.
e. The training causes the MRP of the worker to increase for only the incumbent firm.
If the price of capital increases and the substitution effect dominates, then labor and
capital are and demand for labor will.
a. gross substitutes, increase
b. gross substitutes, decrease
c. gross substitutes, increase or decrease
d. gross complements, increase
e. gross complements, decrease
A result of the Le Châtelier Brown principle is
a. an increase in the price of capital has a larger effect in the short run than the long run.
b. an increase in the price of capital has a larger effect in the long run than the short run.
c. an increase in the price of labor has a larger effect in the short run than the long run.
d. an increase in the price of labor has a larger effect in the long run than the short run.
e. an increase in the price of labor has a large effect in the short run but no effect in the
long run.
Why can consumer prejudice lead to persistent wage discrimination?
a. Consumer prejudice leads to employee and employer prejudice.
b. Majority consumers view the goods produced by the majority as different in kind
than the goods produced by the minority.
c. Consumer prejudice will cease to exist in the long run.
d. Consumer discrimination leads to complete workplace segregation.
e. Different goods cannot command different prices in perpetuity.
As wealth increases, demand for a good decreases. This type of good is a
a. normal good.
b. inferior good.
c. luxury good.
d. Giffen good.
e. B and D
Suppose an agent values the future but cannot accurately predict it. What is this called?
a. rational choice
b. Pareto efficiency
c. marginal revenue
d. bounded rationality
e. new institutional economics
Which of the following would cause Brian to not be willing to pay as much to go to
college?
a. His discount rate decreases to 5%.
b. His wage at the retail store increases to $10K.
c. His wage after graduation increases to $150K.
d. His wage at the retail store decreases to $10K.
e. both A and B
The ratchet effect arises from the principal’s ______.As a result, agents have an
incentive _____to.
a. lack of knowledge about workers’ true abilities; shirk
b. desire for the agents to increase productivity; underperform
c. desire for the agents to increase productivity; shirk
d. inability to precommit to a piece rate; underperform
e. lack of knowledge about workers’ true abilities; shirk
discrimination occurs when impediments hinder certain groups of equally materially
productive individuals from entering particular occupations. When the compensation of
equally materially productive workers depends upon their group affiliations,
discrimination is occurring.
a. Occupational; earnings
b. Market; premarket
c. Earnings; premarket
d. Earnings; premarket
e. Premarket; earnings
What is the labor force participation rate?
a. 2.4%
b. 72.7%
c. 74.5%
d. 78.4%
e. 88.9%
Suppose a worker receives firm specific training, but his wages do not increase
afterward. Why?
a. Specific training has no value to the firm.
b. Specific training does not increase the worker’s productivity.
c. Specific training does not increase the leverage a worker can use to raise his wage.
d. Specific training is inefficient.
e. The worker receives the benefit by the employer paying for the costs of training.
Which of the following would not imply there is a spurious correlation between
education and earnings?
a. Karen receives a higher wage than Daniel because Karen has more innate talent, not
because she went to college.
b. A master’s degree is required to become a librarian to signal to employers an
individual is committed to this career.
c. Jason is a high ability worker and chooses to attend college because he enjoys
learning.
d. After receiving an engineering degree, Calvin is more productive as an electrical
engineer.
e. Frank’s parents force him to go to college, after which he obtains a job that is
unrelated to his degree.
In a situation where workers have more information about their own talents than do
employers, workers cannot simply announce their relative abilities because:
a. both high- and low-ability workers have an incentive to announce they are high
ability.
b. firms are incapable of screening workers.
c. workers cannot signal.
d. signaling is costly.
e. announcing these abilities is costly.
If capital and labor are gross complements 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.
What do the answers to problems 19 and 20 imply about Carolina’s and Matt’s
circumstances?
a. An additional dollar of investing in Matt’s education has a higher rate of return than
Carolina’s.
b. An additional dollar of investing in Carolina’s education has a higher rate of return
than Matt’s.
c. An additional dollar of investing in Matt’s education has the same rate of return as
Carolina’s.
d. Matt has higher innate abilities.
e. Carolina has higher innate abilities.
Which of the following is an example of informal training?
a. A worker chooses to take a course at a local community college.
b. An employer requires all workers to take an on-line course.
c. Over lunch, a senior employee explains a difficult concept to a new worker.
d. Through experience, a worker learns a more efficient way to do his job.
e. The supervisor schedules a meeting with a worker to discuss better ways to perform a
job.
Sample selection occurs because
a. workers choose not to participate in the labor force.
b. the individuals who choose not to participate in the labor force are not random.
c. economists do not know with certainty what wage a worker needs to be offered to
work
d. economists can estimate the income elasticity of the working population.
e. economists can estimate the substitution effect of the working population.
An example of a worker adjusting along the intensive margin is when
a. a worker decides to join the labor force.
b. a worker, who is currently not working, chooses to reject a job offer.
c. a worker decides to leave the labor force.
d. a worker’s wage is cut, so he switches jobs but works the same number of hours.
e. a worker’s wage is cut, so he works fewer hours.
What are the firm’s profits?
a. $1
b. $2
c. $3
d. $4
e. More than $11