econ 380 exam 2
Which of the following are reasons for the inverse relationship between the probability of migration and the distance a person must move? (Select all that apply.)
-The cost of migration is higher. -A worker is likely to possess less information.
Which of the following are reasons for an older worker to be less likely to migrate? (Select all that apply.)
-The psychic costs of migration rise with age. -The older worker has fewer years to recoup their investment costs. -The monetary costs of moving can rise with age.
Approximately what percentage of U.S. workers change occupation each year?
15%
Which of the following are most likely to decrease the market labor supply in a labor market? (Select all that apply.)
A decrease in the number of qualified suppliers of labor in the market An increase in wages in other occupations for which workers are qualified An increase in workers' preferences for leisure
All else equal, in which type of industry would you expect fringe benefits to make up the smallest portion of total compensation?
A low-paying service-producing industry
Which one of the following best represents the principal-agent problem in the employer-employee relationship?
A worker leaves work early without permission.
Which one of the following is a true statement?
About 30% of geographic job-related moves are accompanied by a change in occupation.
Which of the following are implications of the hedonic wage theory? (Select all that apply.)
Allowing workers to choose among various fringe benefits may improve utility. The labor market may generate pay differentials for workers with identical amounts of human capital. Laws that set a minimum standard for nonwage amenities may lower some workers' utility.
The efficiency loss associated with the profit-maximizing wage and employment level is given by area
BAC
Which of the following is a feature of a perfectly competitive labor market?
Costless information
Which of the following are reasons for noncompeting groups to exist in labor markets? (Select all that apply.)
Different innate abilities Different levels of education
The highest level of utility the worker can possibly achieve is
I2, if P is a normal-profit isoprofit curve.
Which of the following are labor immobilities that can create wage differentials? (Select all that apply.)
Institutional immobilities Geographic immobilities Sociological immobilities
Raises and promotions are used by employers as a device to
Raises and promotions are used by employers as a device to
Which of the following best describes the substitution effect of a wage increase?
The cost of labor is relatively higher, causing the firm to use relatively less labor.
Which of the following best describes the substitution effect of a wage decrease?
The cost of labor is relatively lower, causing the firm to use relatively more labor.
Which one of the following events could not have caused a shift from isoprofit line 1 to line 2?
The government began to subject some fringe benefits to the personal income tax.Correct
Which of the following explains why a product market monopolist does not allocate labor efficiently?
The value of the marginal product of labor (VMP) of labor is greater than the marginal revenue product (MRP) of labor.
Which of the following wage differentials may occur under conditions of imperfect, costly information? (Select all that apply.)
Transitional differentials Equilibrium differentials
Refer to the table below. There are initially 28 workers in market A and 63 workers in market B, as indicated by the shaded cells. All markets are assumed competitive and there is perfect information and costless migration; jobs in markets A and B are identical in all nonwage aspects. Given the initial situation, which one of the following may be expected to occur?
Workers will migrate from A to B.
Refer to the following diagram. Assume all migration is costless. If wages are initially $10 in country X and $25 in country Y, then we should expect higher rates of capital investment in
X relative to Y, eventually resulting in increased labor demand in X.
Principals hire agents to _____.
advance the interests of the principals
Tournament pay is an incentive pay plan in which employees are paid _____.
based on their performance relative to other employees
Advantages of paying workers bonuses include _____.
bonuses do not permanently raise base salaries
Suppose workers in labor market X are qualified to work in an alternative competitive labor market Y, and vice versa. An increase in the demand for labor in market Y will
decrease labor supply in X and drive its wage up.
In the equation for the net present value of migration, the term "E2" refers to
earnings from the new job.
Assume that the labor market is perfectly competitive. Compared to a firm facing D1, a firm facing demand schedule D2 but paying the same wage will hire
fewer workers, since product price declines as output increases.
Assume that the labor market is perfectly competitive. Suppose the firm's product demand is given by the column labeled D1. If the wage rate is $100, the firm will achieve maximum profit by hiring ________ workers.
five
Time payments are _____.
fixed annual salaries paid to workers typically engaged in team production
On an indifference map, a higher indifference curve indicates _____ utility
higher
Suppose a firm decides to raise pay as a way to reduce worker turnover. The resulting pay differential
is an equilibrium differential.
The marginal revenue product schedule
is the firm's labor demand schedule, provided the firm is operating in the zone of production.
The long-run response to a drop in the wage exceeds the short-run response for all of the following reasons except
it is more difficult to substitute capital for labor in the long run than the short run.
Native-born workers are more likely to ______ an area with high levels of international immigration.
migrate out of
Which of the following is not a source of persistent compensating wage differentials?
migration from lower paying jobs to higher paying jobs
The impact of illegal immigration on wages is _____ at current levels of illegal immigration.
minimal
An efficiency wage is one that _____.
minimizes an employer's wage cost per effective unit of labor service
Many scholars of illegal immigration conclude that most illegal immigrants pay _____ in taxes when compared with the fiscal benefits received.
more
A firm in a perfectly competitive labor market and product market faces a _____ labor demand curve and a _____ labor supply curve.
negatively-sloped; horizontal
The total net private gain from migration to migrants and their employers
overstates the social gain if there are real external costs associated with the move.
According to research by Kostiuk, "shift work"
provides a greater wage premium for less-educated workers than for highly educated workers.
Offering _____ means that a worker's decision about hours of work versus leisure in any given year is not based on that year's salary alone but also on future salary.
raises and promotions
All else being equal, people who work in jobs that are characterized by variability of employment, the variability of earnings, or both tend to
receive a compensating wage differential.
Suppose the wage is currently W3 and L1 is the level of employment. Then we should expect the wage to
rise and employment to rise.
There will be a shortage of labor in a particular market if
the current wage is below the wage that would clear the market.
A stock option will have value to a worker if
the firm's stock price is expected to rise.
All else equal, a worker is less likely to move
the greater the amount of specific training the worker has.
The wage paid by an individual firm in a perfectly competitive labor market is determined by _____.
the interaction between the market labor supply and the market labor demand curves
At the least-cost combination of capital and labor,
the marginal rate of technical substitution of labor for capital equals the ratio of the price of labor to the price of capital.
Because the cost of living is higher in New York City compared to Kansas City, _____.
the number of workers who are willing to supply labor at each nominal wage is less in New York City than in Kansas City
The effectiveness of profit-sharing plans may be diminished because
the plans are tied to group performance, so the link between profit-sharing and worker productivity is not always clear-cut.
Families headed by ______ are more likely to migrate.
unemployed people
In equilibrium,
worker A will work for firm X; worker B will work for firm Y.
Labor market efficiency requires that _____.
workers be allocated to optimal work and be paid under an optimal compensation plan
If legislation set the minimum wage at W2, then employment
would rise from its original monopsony level.
What is the marginal revenue product of the fourth worker?
$32
The slope of employer's isoprofit curve is _____.
-1
In which of the following situations are piece rate pay compensations are often found? (Select all that apply.)
-Firms find it expensive to monitor worker effort. -workers control the pace of work.
Which of the following are true of the rates of return to migration? (Select all that apply.)
-High average rates of return do not imply positive returns for all migrants. -Increases in lifetime earnings do not imply that migrants will receive annual earnings equal to those received by people already at the destination.
Which of the following are likely to occur when there is a migration of labor from a low-wage country to a high-wage country? (Select all that apply.)
-Increases in the total value of output in the country to which workers have migrated -Equalization of wages across countries and allocative efficiency
Which of the following are true of the Immigration Reform and Control Act of 1986? (Select all that apply.)
-It made it illegal for employers to hire undocumented workers. -It granted permanent residence to illegal immigrants.
Which of the following are true of labor market efficiency? (Select all that apply.)
-No worker can switch from one job to another to increase economic well-being. -Workers are allocated to optimal work.
Which of the following are reasons for fringe benefits to have increased historically? (Select all that apply.)
-Rising average incomes combined with income-elastic fringe benefits -The impact of labor unions in the United States, even on nonunion firms -Significant economies of scale in the collective purchase of fringe benefits
Which of the following are reasons for firms to pay fixed annual salaries instead of fixed hourly wages to workers? (Select all that apply.) Multiple select question.
-Workers are needed when production is high as well as when it is low. -Firms incur high search, hiring, and training costs for workers.
In his comparison of over 100 studies of labor demand, Hamermesh concludes the overall long-run elasticity of labor demand in the United States to be
1.0
Empirical studies indicate that the estimated rate of return to migration is generally between _____.
10 and 15 percent
If MRP = W < VMP, what kind of a firm is under consideration?
A product market monopolist that is a perfect competitor in the labor market
Efficiency wage models are often criticized because
All of the other choices are correct. other pay-for-performance plans could serve as a substitute for an efficiency wage. employees could be required to post a forfeitable bond instead. shirking could be reduced by deferred compensation plans.
Older workers are less likely to migrate, because older workers
All of the other choices are correct: -have typically accumulated more possessions, raising -the direct cost of moving. are more likely to have to give up seniority and pension benefits. -are more likely to have high psychic costs of moving.
Which one of the following is not typically offered as an explanation for efficiency wages?
An employer will not pay a wage that exceeds the market rate.
Which of the following are most likely to cause a shift in the market labor demand curve? (Select all that apply.)
An improvement in labor productivity An increase in the demand for the product produced by labor
_____ _______ require different types and degrees of skill and vary in the efficacy of paying efficiency wages to increase productivity. (Enter one word in each blank.)
Blank 1: Heterogeneous Blank 2: jobs or job
_____ ______ ______ promote worker mobility that eventually reduces wage disparities. (Enter one word in each blank.)
Blank 1: Transitional Blank 2: wage Blank 3: differentials
A(n) ______, is a party who is hired to advanced the interests of another party known as a(n) _________(Enter one word in each blank.)
Blank 1: agent Blank 2: principal or principle
A lack of __________ ___________ results in migrants being paid less than similarly trained, educated, and employed workers at the destination. (Enter one word in each blank.)
Blank 1: skill Blank 2: transferability
______ remove(s) the wage disparity because firms move production to labor markets with lower wages, increasing the demand for labor and increasing the wages.
Capital mobility
In which of the following locations, compensating wage differentials are most likely to be paid? (Select all that apply.)
Cities with a higher cost of living Cities with high housing prices Smaller towns, with few amenities
In which of the following forms of equity compensation plans can employees be paid? (Select all that apply.)
Company stock Stock options
______ are the extra pay that an employer must provide to compensate a worker for some undesirable job characteristic that does not exist in an alternative employment.
Compensating differentials
_____ wage differentials do not induce movement of labor the lower-paying to the higher-paying jobs. _____ wage differentials promote worker mobility.
Equilibrium; Transitional
Which of the following is a solution to the incentive problem posed by fixed annual salaries?
Establishing performance-based raises and promotions
True or false: Undocumented workers take jobs domestic workers do not want.
False
Which of the following is not predicted by the hedonic theory of wages, all else constant?
Firms that pay lower wages but offer more amenities have higher than average profits
Which of the following research findings would support an efficiency wage explanation of pay differentials?
Firms with higher costs of detecting shirking pay higher than average wages.
Suppose there is an increase in immigration rates of unskilled, illegal aliens. Which of the following is not likely to result?
For each immigrant who receives a job, there would be one less job available for a native worker.
Which of the following factors will reduce migration? (Select all that apply.)
Home ownership Union membership
Which of the following is true of the Immigration Reform and Control Act of 1986? Multiple choice question.
It granted amnesty and legal status to undocumented individuals who had lived in the United States since 1982.
Which of the following is true of the hedonic wage theory?
It hypothesizes that workers are interested in maximizing net utility.
In which of the following situations, compensating wage differentials are most likely to arise? (Select all that apply.)
Jobs in which compensations are paid at irregular intervals Jobs in which workers have to work for long hours Jobs in which unemployment is more likely
Which of the following are sources of compensating wage differentials?
Lower possibility of wage advancement Less than ideal job location Lower job security Poor job status Lower fringe benefits Higher risk of being injured or killed on the job
Which of the following would be considered a real (as opposed to pecuniary) externality associated with migration?
More public services will be required in the destination, and there will be excess capacity of public goods in the origin.
In comparing two otherwise identical industries X and Y, an economist finds that labor demand is more elastic in industry X. Which of the following would support this finding?
Product demand elasticity is higher in X than in Y.
Suppose workers of type A have a value of marginal product (VMP) equal to $15 per hour in Industry X and workers of type B have a VMP equal to $15 per hour in Industry Y. Is this allocation of labor efficient?
The answer cannot be determined without more information.
Which of the following explains why a labor market monopsonist does not allocate labor efficiently?
The marginal wage cost (MWC) of labor is greater than the wage rate for the firm.
Which of the following is a true statement?
The monopolist's demand for labor curve is less elastic than if it were a competitor in the sale of its output.
Refer to the figure. Which of the following is true of the wage-fringe benefit model?
The optimal combination of wages and fringe benefits occurs where WF is tangent to I2.
Which of the following portrays the optimal combination of wage rate and nonwage amenity for a worker maximizing total utility? (Select all that apply
The worker reaches the highest possible indifference curve. The worker's indifference curve is tangent to an employer's isoprofit curve.
Which of the following are true of compensating wage differentials? (Select all that apply.)
They are also called wage premiums. They are equilibrium wage differentials because they do not cause workers to shift to the higher-paying jobs.
Which of the following are other job heterogeneities that cause wage differentials and cannot be explained by compensating differentials, skill differentials, or equilibrium differentials? (Select all that apply.) Multiple select question.
Union status Firm size Tendency of firms to discriminate
Assuming perfect competition, costless information, and costless migration, labor will relocate until _____.
VMPs are equal in all labor markets
Which of the conditions given below is most consistent with a labor market monopsonist that is a perfect competitor in the product market?
W < MRP = VMP
At the profit-maximizing level of employment, the wage rate is ________ and the level of employment is ________.
W1; Q1
Suppose the wage is currently W1 and L1 is the level of employment. If the firm sells its output competitively, the value of the last worker's additional output is ________ and the opportunity cost of the last worker's time is ________.
W1; W3
Which of the following are the implications of imperfect and costly information? (Select all that apply.)
Wage differences within occupations do not evoke job switching. Long-run supply adjustments to wage differentials created by changes in demand are likely to be slow.
Refer to the following diagram. Initially, wage rates are WM in Country M and WU in Country U. Subsequent migration results in an equalization of wage rates. For Country M capital owners, migration causes a collective loss equal to area
WebcWM.
In the hedonic theory of wages, indifference curves are mapped as a trade-off between _____.
a "good" and the absence of a "bad"
The shape of the indifference curves reflects
a diminishing marginal rate of substitution of fringe benefits for wages.
A perfectly competitive labor market may be characterized by all of the following except
a few firms that dominate hiring in the market.
Even if fringe benefits provided no tax advantages, workers may still be willing to trade off wages for fringe benefits because fringe benefits can be ________.
a guard against a tendency not to purchase goods that delay gratification, such as insurance
Jobs in which compensations are paid at irregular intervals Jobs in which workers have to work for long hours Jobs in which unemployment is more likely
a lower initial salary
Profit sharing is an incentive pay plan in which employees are paid _____
a specified portion of a firm's profits
Profit sharing is an incentive pay plan in which employees are paid _____.
a specified portion of a firm's profits
VMPAx = VMPAy =... = VMPAn = PLA In the condition for allocative efficiency given above, x and y represent _____ to which the condition is applied.
all possible products
The turnover model suggest that higher wages reduce hiring and training costs, making the wage differential _____.
an equilibrium differential
In the labor market shown, at a wage rate of Wes, there would be _____.
an excess supply of labor equal to Q2 - Q1
One implication of efficiency wage models is that
an excess supply of labor may be created.
All else equal, which of the following will increase the demand for labor in a particular market?
an increase in the number of employers
In the long run, the substitution effect of a lower wage
and the output effect both increase the quantity of labor demanded.
Relative to their monopsony levels, both the wage and the level of employment would increase in this market if a wage-setting union negotiates a wage
anywhere between W1 and W3.
Royalties would most likely be received by a(n)
author
True or false: As an employee receives more fringe benefits, the greater the amount of compensation he or she would be willing to give up in exchange for more fringe benefits. True false question.
false
True or false: In a market with homogeneous jobs and workers, competition, and perfect mobility, wages in some submarkets will be higher than in others.
false
True or false: Workers cannot move from one non-competing group to another.
false
"To find the market demand curve for a particular type of labor, simply sum the labor demand curves of all employers of that type of labor." This statement is
false-although the price of output for any individual firm may be constant, this may not be the case for all firms taken collectively.
"Any worker for whom the present value of lifetime earnings will increase by migration will choose to move." This statement is
false; there may be psychic costs of moving that deter migration.
Consider the wage-fringe optimum shown at point b in the diagram. The growth of fringe benefits as a form of compensation can be best explained, using the wage-fringe benefit model, by _____.
flattening out of the isoprofit curve
Consider a worker who faces a trade-off between wages on the vertical axis and job safety on the horizontal axis. The less averse a worker is to risk of injury on the job, the
flatter are this worker's indifference curves.
Workers are more likely to ______ to reduce the distance costs of migration.
follow routes of migration previously used by family and friends
The shape of the worker's indifference curves—I1, I2, and I3—indicates that
for each successive reduction in job safety, greater increases in wages are required to maintain the same utility.
In some instances, profit-sharing may not be a very effective tool for raising worker productivity because of the
free-rider problem.
An executive for an aerospace firm getting transferred from Topeka to Tacoma is an example of a(n) _____.
geographic change with no change in occupation
Restrictions on mobility because a person wants to stay close to their family are _____.
geographic immobilities
Highly specialized workers will use ______, while less specialized workers will use ______ to achieve gains in earnings. Multiple choice question.
geographic mobility; occupational mobility
When a firm pays efficiency wages to employees, quantity of labor supplied is ______ quantity of labor demanded.
greater than
The share of fringe benefits in total employee compensation
grew steadily from 1960 through the present.
The contingent work force
has grown more than three times as fast as the rest of the work force over the last three decades.
Jobs that have differing non-wage attributes, require different types and degrees of skills, vary in the efficacy of paying efficiency wages, or have different union status, size, or discriminatory attitudes are called _____.
heterogeneous jobs
The proportion of total compensation paid out as fringe benefits tends to be larger in
high-paid industries compared to low-paid industries.
When two jobs are identical in all aspects except that one requires a college degree, the wages paid in the job requiring the degree will be _____.
higher
All else equal, a worker is more likely to move if
his or her spouse has accumulated very little job tenure.
Workers in a perfectly competitive labor market have _____.
identical skills
Equity compensation is an incentive pay plan in which employees are paid _____.
in part by being given firm stock
Commissions and royalties are incentive pay plans in which employees are paid _____.
in proportion to the value of sales made by the employee
In stage I of the production function, increases in the amount of labor will
increase the average productivity of both capital and labor.
If labor and capital are immobile, but product flows between two markets, demand for the product produced with cheaper labor will _____, causing the wage to _____.
increase; increase
Empirical studies indicate that migration _____ lifetime earnings of the average earner.
increases
Capital mobility allows producers to move production to labor markets with lower wages, _____ demand for labor and _____ the wage in those labor markets.
increasing; increasing
Generally speaking, _____ labor supply curves tend to be backward-bending but _____ labor supply curves tend not to be.
individual; market
If the value of the marginal product (VMP) of a certain type of labor is higher in one industry than in another industry, but in both industries the wage is equal to the VMP, the allocation of labor is _____.
inefficient
Early empirical evidence reported by Barry Chiswick indicated that foreign-born persons migrating to the U.S., all else constant,
initially tended to earn less than natives, caught up after 10-15 years, and eventually surpassed natives.
Restrictions on mobility imposed by the government are considered to be _____.
institutional immobilities
As a percentage of benefits, the largest share goes to
insurance
It is not clear that profit sharing eliminates the principal-agent problem because profit sharing _____.
is based in group, not individual, performance
The hedonic method of valuing a human life
is based on the "price" of accepting risk as revealed in compensating wage differentials.
A bank employee being reassigned from one branch of a local bank to another is an example of a(n) _____. Multiple choice question.
job change with no change in occupation or residence
A _____ will not allocate labor efficiently because the marginal wage cost (MWC) of labor is greater than the wage rate for this firm.
labor market monopsonist that sells in a perfectly competitive product market
Assuming that people's time preferences for earnings are the same at any given wage, _____.
labor supply will be greater to jobs with greater prospects for earnings increases and less to jobs with flat lifetime earnings streams
Assuming workers and jobs are identical, if information is perfect and job search and migration are costless, then
labor will flow among employers until all wages are equal.
All else equal, large firms tend to pay higher wages. This may be explained by all of the following, except
large firms are more likely to discriminate against women and minorities.
everal studies indicate that ______ firms pay higher wages and salaries in general than smaller firms. (Enter one word in the blank.)
larger
Workers with _____ families are _____ likely to migrate.
larger; less
Compared to the long-run labor demand curve, the firm's short-run curve is typically
less elastic
All else equal, the imperfectly competitive seller's labor demand curve is
less elastic than that of a perfectly competitive seller.
All else being equal, the older a person is _____ he or she is to migrate.
less likely
If this optimal wage, job-safety combinations have been determined by a hedonic theory of wages model, it is likely that an employee who prefers point b has _____ preference for safety compared to the employee who prefers point a.
lower
Compared to present-oriented people, individuals who are more future-oriented tend to have ________ discount rates and consequently tend to obtain ________ education and earnings.
lower; more
Employers pay compensating wage differentials when there are aspects in a job that _____.
make it undesirable compared to other jobs
Of the following occupational groups, 2018 average hourly earnings were greatest among
management, business, and financial workers.
At the profit-maximizing level of employment for a monopolist,
marginal revenue product is less than the value of marginal product.
Of the following industries, 2018 average hourly earnings were greatest in
mining
Refer to the following diagram, in which Sd is the supply curve of domestic labor and St is the total labor supply curve including the supplies of illegal immigrant workers. L is measured in thousands of workers. Consider the market depicted in the diagram. Supporters of illegal immigrants claim that no domestic workers are willing to do this type of work. Their claims are
misleading; although no domestic workers are currently performing this work, some domestic workers would take these jobs at wages above $7.
All else equal, more educated workers are ______ to migrate than less educated workers.
more likely
Workers with spouses who are not employed are ______ than other workers.
more likely to migrate
Unemployment occurs under the efficiency wage model because _____.
more people want to work at the higher wage than are needed
Unemployment occurs under the efficiency wage model because _____. Multiple choice question.
more people want to work at the higher wage than are needed
Even when individual labor supply curves are backward-bending, market labor supply curves tend not to bend backward because as wages rise _____. Multiple choice question.
more workers tend to enter the labor market
A firm in a perfectly competitive labor market and product market faces a _____ labor demand curve and a _____ labor supply curve. Multiple choice question.
negatively-sloped; horizontal
Refer to the following diagram. Assume all migration is costless. If there are initially 1,000 workers in country X and 500 workers in country Y, then we should expect
net migration from country Y to country X.
As we move _____ from the origin on an indifference map, the worker's utility increases.
northeast
Which one of the following is generally considered a characteristic of a perfectly competitive labor market?
numerous firms hiring labor from the same pool of qualified workers
The _____ model of efficiency wages says that some enterprises pay more than the market-clearing wage to improve the health levels of the workers.
nutritional
the _____ model of efficiency wages says that some enterprises pay more than the market-clearing wage to improve the health levels of the workers.
nutritional
Sam left his job as an auto mechanic to accept a position in his local Sears store as an auto parts salesman. This is an example of
occupational mobility.
Medical students
on average underestimate the current earnings of physicians.
Where negative externalities from migration are substantial and diffuse, the private gains to migrants and employers will _____ the net gain to society.
overstate
To equalize the gross hourly compensation between firms that hire similar workers and pay similar wage rates but different fringe benefits, firms that do not provide fringe benefits will have to _____. Multiple choice question.
pay a compensating wage differential to workers
A labor market monopsonist will not allocate labor efficiently because this firm must _____.
pay a higher wage to all workers to attract additional workers
Compared to a firm that sells its output competitively, an otherwise identical monopolist operating in the same labor market will
pay the same wage
Bonuses are incentive pay plans in which employees are paid _____.
payments beyond the annual salary based on some factor such as personal or firm performance
A(n) _____ externality occurs when the wage of a native worker declines because of migration.
pecuniary
An individual firm in a perfectly competitive labor market and product market faces a _____.
perfectly elastic labor supply curve
Consider a worker who faces a trade-off between higher wages and a more relaxed work environment as shown in the diagram. A worker whose indifference curves are relatively steep
places a relatively high value on additional informality on the job.
The rate of unemployment at the origin of migration ______ outmigration.
positively affects
A _____ will not allocate labor efficiently because the marginal revenue product (MRP) of labor is less than the value of the marginal product (VMP) of labor for this firm.
product market monopolist hiring labor in a perfectly competitive labor market
Salaried workers can be considered "quasi-fixed resources" in that
production is largely independent of the firm's use of salaried workers.
Paying a worker more to reduce shirking is an equilibrium differential because the firm finds the higher pay _____.
profit maximizing
Steep isoprofit curves indicate that successive reductions in the "bad" are _____.
progressively more expensive
The purpose of tournament pay is to _____.
promote greater performance by all participants throughout the rankings
Which one of the following will tend to decrease the perceived costs of a move relative to the perceived benefits?
renting, as opposed to owning, one's home
According to the hedonic theory of wages, workers will maximize net utility by exchanging _____.
something that produces utility to reduce something that yields disutility
One view of the firm is that stockholders hire managers who, in turn, hire workers. Maximum profits are earned by satisfying the customer. The two principal-agent relationships illustrated in this view are
stockholder-manager, manager-worker.
One criticism of the cobweb model is that
students form rational expectations of the effect of changes in labor demand and adjust their supply responses accordingly.
Two people with similar innate abilities often choose jobs with different pay and amenities. This can be explained by differences in _____.
tastes for nonwage aspects of jobs
Compensating wage differentials will arise for jobs _____.
that are low in status
Because the costs of migration often occur immediately, but the benefits are earned over time through increased earnings, the decision to migrate requires that the worker consider _____.
the PV of net benefits
A worker should only migrate when _____.
the PV of net benefits is positive
Lower-paid workers often seem to have less-desirable working conditions as well because
the compensating differential for skill often outweighs the compensating differential for poor working conditions.
The firm's wage-fringe isoprofit curve typically has a slope less than 1 (absolute value) because
the composition of fringe benefits may increase worker productivity.
In the model of the wage-fringe optimum shown in the given picture, worker's interests are represented by _____ and firm's interests are represented by _____.
the indifference curves; the isoprofit curve
All else equal, a worker is more likely to move
the lower the discount rate.
Which of the following problems is associated with the payment of annual salaries to workers?
the principal-agent problem
A product market monopolist will not allocate labor efficiently because _____.
the product price falls as more labor is hired
A product market monopolist will not allocate labor efficiently because _____. Multiple choice question.
the product price falls as more labor is hired
All else equal, a worker is less likely to move,
the smaller the wage differential between the destination and the origin.
In a perfectly competitive environment, the height of the market labor supply curve at any given number of labor hours indicates
the value of the alternative activity in which the marginal hour might otherwise be used.
Workers receiving annual salaries may have an incentive to reduce work hours below levels that they would work if they were paid by the hour because _____.
they can reach a higher indifference curve by shirking
Assume that the labor market is perfectly competitive. Suppose the firm's product demand is given by the column labeled D2. If the wage rate is $100, the firm will achieve maximum profit by hiring ________ workers.
three
Two people with similar innate abilities and access to financing often choose to obtain differing levels of human capital. This can be explained by differences in _____.
time preferences
two people with similar innate abilities and access to financing often choose to obtain differing levels of human capital. This can be explained by differences in _____.
time preferences
In a work environment in which teamwork is highly valued, pay is more likely to be received as
time rates
Jobs that require higher skill levels often pay more _____.
to compensate for the cost of acquiring the additional skills
Compared to the allocatively efficient amount, a monopsonist tends to hire
too few workers because the value of marginal product exceeds marginal revenue product.too few workers because marginal wage cost exceeds the wage rate.
Assume that the labor market is perfectly competitive. Suppose the firm's product demand is given by the column labeled D2. If the wage rate rises from $100 to $130, the firm will reduce the quantity of labor employed by ________ unit(s).
two
VMPAx = VMPAy =... = VMPAn = PLA In the condition for allocative efficiency given above, A represents the _____ to which the condition is applied.
type of labor
The labor market shown in the figure will clear at a _____.
wage rate of W0 and a quantity of labor of Q0 (equilibrium)
In the theory of optimal fringe benefits, workers' indifference curves indicate the trade-off between different combinations of _____.
wages and fringe benefits
If all the individual labor supply curves in a market are backward-bending, the market labor supply curve _____ be positively sloped because _____.
will nonetheless likely; as wages rise, more workers will enter the labor market
Commissions and royalties are efficient where _____.
work effort and hours are difficult to observe
If job X pays more than identical job Y, then the wage rates will
equalize if information is perfect and mobility is costless.
In this figure, if wages move from wu and wm to we, area _____ will be the increase in output in the United States, while area _____ will be the decrease in output in Mexico.
ebcf; kijl
Assume that information is perfect, mobility between jobs is costless, and that all nonwage aspects of the two are identical. The outcome shown in the diagram
does not represent an equilibrium. The supply of labor in market A will shift leftward, and that in market B will shift rightward until the wage rates equalize.Correct
Suppose that all other nonwage aspects of the jobs in these two markets are identical. We would expect labor supply in B to increase if
earnings are more variable in A
The hedonic theory of wages assumes _____.
both jobs and workers are heterogeneous
In a labor market with homogeneous workers, perfect mobility, and competition, wages in different sub-markets will be _____.
equal in both submartkets
To model a labor market where supply responses can sometimes be delayed by several years after a wage change, it is helpful to use a(n) _____ model.
cobweb
Employer's isoprofit curve indicates the various _____.
combinations of wages and fringe benefits providing a given profit level
Piece rates are _____.
compensation paid in proportion to the number of units of personal output
Trade of product between nations and regions _____ labor migration in promoting an efficient allocation of resources.
complements
Isoprofit curves are generally _____ because additional reductions in the "bad" cost more than previous reductions.
concave to the origin
Isoprofit curves are generally _____ because additional reductions in the "bad" cost more than previous reductions. Multiple choice question.
concave to the origin
Assume that skilled labor and energy are substitutes in production. An increase in energy prices is then predicted to
decrease the demand for skilled labor if the output effect outweighs the substitution effect.
Since 1980, the number of jobs in manufacturing has
decreased, reflecting in part the increased reliance of manufacturing on workers from temporary help agencies.
If wages for engineers rise and college freshmen response to that wage increase by choosing to major in engineering, the supply response will be _____.
delayed
When the probability of death or injury in a job is higher relative to other jobs requiring similar skill, workers will _____.
demand compensating wage differentials
Because there is a ________ marginal rate of substitution of fringe benefits for wages, a worker's wage-fringe indifference curves are typically _______.
diminishing; convex to the origin
