Suppose a competitive labor market is populated by 75% high-ability (H) workers and
25% 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.
Which of the following is NOT an example of job-market signaling?
a. educational investments
b. reference letters
c. career building
d. extra-curricular activities
e. volunteer work
Suppose the firm operates in a competitive market. What is the equilibrium level of
employment?
a. 20 workers
b. 40 workers
c. 80 workers
d. 90 workers
e. 100 workers
Let and denote the respective abilities of worker A and worker B,
and let and . The opportunity cost of performing task 1 in
terms of task 2 is denoted:
a.
b.
c. or
d.
e.
If an economy has reached the general equilibrium then
a. the actions leading to it are not grounded in rational behavior.
b. one group is operating in isolation of all other groups.
c. all interconnected groups are included and their decision process is modeled.
d. the outcome is not necessarily feasible.
e. there is a transaction possible that would be a Pareto improvement.
Which of the following individuals would be considered unemployed, according to the
Bureau of Labor Statistics glossary?
a. a 15-year-old who is looking for an after school job
b. a mother that quits her job to take care of her children
c. a 22-year-old male, who is not in college, and takes a week off to go on Spring Break
with his friends
d. a father who is laid off, is waiting to be recalled to his job, but is not looking for a
new job
e. an individual who takes a few days off after coming down with the flu
Which of the following explains why increasing the minimum wage may fail to reduce
income inequality or the poverty rate?
a. The Wessel’s effect only applies to those workers with fringe benefits.
b. Employers may expect increased effort from workers after a minimum wage
increase.
c. The majority of those affected by the minimum wage live in households with
aggregate income far above the poverty line.
d. The minimum wage causes an increase in the out of poverty escape rate.
e. Earning the minimum wage cannot give the worker enough income to put him above
the poverty line.
Which of the following is not a true statement about the demand for labor?
a. Wages and the number of workers demanded are endogenous variables.
b. The amount of the good demanded and the rental rate of capital are exogenous
variables.
c. Higher wages decrease the quantity of labor demanded by employers.
d. A decrease in the demand for a good decreases the demand for labor.
e. If the rental rate of capital increases, demand for labor will always decrease.
What is the equilibrium level of employment for a monopsonist?
a. 30 workers
b. 50 workers
c. 60 workers
d. 80 workers
e. 90 workers
In a tournament, the optimal prize spread must ______ with the number of competitors
in order to maintain high-effort incentives. This proposition has received wide empirical
support using data on ______ .
a. decrease; CEO compensation
b. decrease; unionized workers
c. increase; CEO compensation
d. increase; unionized workers
e. not change; CEO compensation
Hedonic pricing is NOT used to model:
a. Compensating wage differentials.
b. The choices workers make concerning levels of undesirable job attributes.
c. The wage increase required to take on some level of fatality risk.
d. The distribution of workers’ tolerance for risk
e. The wage increase given to a worker with an additional year of education.
When a rational choice model is applied, the individual
a. is never selfish, spiteful, or altruistic.
b. has behavior that is not consistent over time.
c. is always selfish, spiteful, or altruistic.
d. maximizes his wellbeing subject to a constraint.
e. maximizes his utility but is not constrained.
For training, a worker’s starting wage depends on the costs of training. For training, a
worker’s wage does not depend on the costs of training.
a. general, specific
b. general, general
c. specific, general
d. specific, specific
e. informal, formal
Which of the following is not true about general training?
a. The greater the costs of training, the lower the initial wage.
b. Training causes the worker’s MRP to increase equally for the incumbent firm, as well
as spot market firms.
c. The worker always receives his MRP.
d. For the first few years, workers are paid less than their MRP.
e. After training is complete, the workers receive their MRP.
Which of the following is NOT a reason incentive mechanisms are used in an
organization?
a. Principals who own the firm have an incentive to shirk.
b. Agents seek to maximize their own utilities.
c. Workers at every level of an organization, including CEOs, are principals.
d. Incentive mechanisms work by better aligning the interest of workers with the firm’s
profit-maximizing goals.
e. Tournaments induce relatively high-effort levels.
In a hedonic model, each worker’s utility, u, depends upon his consumption, c, and a
single job attribute, z. It is always true that z_______ in a hedonic model.
a. is a desirable job attribute
b. is an undesirable job attribute
c. represents a non-wage job attribute
d. measures a worker’s risk of physical injury
e. is unchangeable
If one small restaurant decreases its demand for cooks, then
a. the wages of cooks will increase, and employment of cooks will decrease.
b. the wages of cooks will decrease, and employment of cooks will increase.
c. the wages of cooks will remain the same, and employment of cooks will decrease.
d. the wages of cooks will remain the same, and employment of cooks will increase.
e. the wages of cooks will remain the same, and employment of cooks will remain the
same.
What is the restaurant’s accounting profit?
a. $50
b. $150
c. $200
d. $300
e. $350
Over the past several decades, the nominal wage has while the real wage has.
a. increased, increased
b. increased, decreased
c. increased, remained the same
d. remained the same, increased
e. remained the same, remained the same
Today, the median full-time weekly earnings of women relative to men is about:
a. 50 percent.
b. 55 percent.
c. 60 percent.
d. 70 percent.
e. 80 percent.
In an environment ______ with workers, both OIPs and salaries can exist. ______
attract high-ability workers while ______ attract low-ability workers.
a. homogeneous; OIP schemes; salaried schemes
b. heterogeneous; OIP schemes; salaried schemes
c. homogeneous and heterogeneous; OIP schemes; salaried schemes
d. homogeneous; salaried schemes; OIP schemes
e. heterogeneous; salaried schemes; OIP schemes
When a firm moves to a lower isoquant, it is always true that
a. the utility of the owner decreases.
b. the utility of the workers decreases.
c. the firm produces less output.
d. the firm produces more output.
e. the firm uses less capital.
Human capital includes all of the following except
a. learning how to use a new type of software.
b. obtaining an MBA to improve the possibility an individual gets a job in management.
c. moving from a rural area to a city where there are more jobs.
d. purchasing a new computer.
e. quitting smoking in order to improve a person’s health.
If the benefit reduction rate is 25 percent, the net gain from an additional dollar of
income is:
a. $1.25.
b. $1.00.
c. $0.75.
d. $0.50.
e. $0.25.
What would be the optimal level of employment if a union came in and set a minimum
wage at $60?
a. 30 workers.
b. 50 workers.
c. 60 workers.
d. 80 workers.
e. 90 workers.
According to Becker’s theory of consumer prejudice,
a. White customers suffer a utility loss whenever they acquire products that are served
by Black workers but do not when they acquire products that are produced by Black
workers.
b. consumer discrimination leads to workers who are employed in completely
segregated firms.
c. White consumers are willing to pay less for a good produced by a White worker than
they are willing to pay for a good produced by a Black worker.
d. White customers suffer a utility loss whenever they acquire products that are
produced or served by Black workers.
e. the wage effects of discrimination will not be zero in the long run.
If workers are perfectly mobile, what will be the wage of the typical chef in a diner?
a. $5
b. $6
c. $7
d. $8
e. $9
The straight time hourly wage equals
a. wages plus overtime plus holiday payments.
b. the hourly wage times hours worked.
c. the hourly wage times hours worked plus fringe benefits.
d. the hourly wage.
e. the hourly wage plus the hourly value of benefits for the worker.
Which of the following statements is true?
a. In terms of the real wage, a competitive firm’s MP of labor is less than its labor
demand.
b. In terms of the real wage, a competitive firm’s MP of labor is greater than its labor
demand.
c. In terms of the real wage, a competitive firm’s MP of labor is equal to its labor
demand.
d. In terms of the nominal wage, a monopolist’s MRP of labor is equal to its labor
demand.
e. In terms of the nominal wage, a monopolist’s MRP of labor is greater than its labor
demand.
What is the most commonly used normative criterion?
a. Pareto efficiency
b. fairness
c. equality
d. marginal productivity
e. rational choice
Suppose at any given time 7 of 16 workers are unemployed. What is the unemployment
rate?
a. 7%
b. 16%
c. 44%
d. 56%
e. 73%