CHAPTER 7

______________ is typically associated with greater profits

Efficiency wage theory

Compensating differentials theory says that paying above market wages will lead to workers with higher ability.

False

External competitiveness is primarily determined by the impact of government regulations on the firm or industry.

False

Job applicants who will not accept a job that pays below a certain level are acting according to signaling theory

False

Signaling theory argues that higher wages leads to greater efficiency.

False

Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses.

False

The first assumption of labor market theories is that employers always seek to maximize penetration.

False

The most influential theory explaining pay-level differences is marginal revenue productivity.

False

The product market sets the floor on the minimum wage required to attract sufficient numbers of employees.

False

If Company A raises its pay rate one dollar per hour to hire additional workers and competitors immediately match the increase, what is the most likely result?

Higher labor costs for Company A, but not more workers.

_____________relationships between employer size and its ability to pay: talented individuals have a higher marginal value in a larger organization, talented people can influence more people and decisions, and influence of talented people leads to more profits

TRUE

A lead policy may force the employer to increase wages of current employees too, to avoid internal misalignment and murmuring.

True

According to efficiency-wage theory, paying higher wages than competitors lowers labor costs due to more efficient workers.

True

An employer offering lower base pay with high bonuses is likely signaling they are seeking risk-taking employees.

True

An individual manager could be a factor affecting an employer's external competitiveness.

True

Both pay level and pay mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees.

True

Combat pay premiums paid to military personnel offset some of the risk of being fired upon is an example of a lead pay-level policy.

True

Employers in highly competitive markets are less able to raise prices without loss of revenues.

True

Graduating students usually find themselves in a quoted-labor market.

True

Human capital theory assumes that people are paid at the value of their marginal product.

True

In a labor market, the demand side focuses on the actions of the employers.

True

In a labor market, the market rate is where the lines for labor demand and labor supply cross.

True

In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying.

True

In practice, organizations use skills and competencies to assess value of labor instead of marginal revenue product.

True

It is likely that workers act in accordance with reservation wage theory with respect to both wages and benefits.

True

Marginal productivity theory argues that when factors of production are held constant, each additional worker is less productive than the last one hired.

True

Marginal revenue is measurable and used by managers to determine both pay levels and how many employees to hire.

True

Other things being constant, in a hiring scenario, the employer will continue to hire until the marginal revenue generated by the last hire is equal to the costs associated with employing that person.

True

Signaling theory applies to both the demand and supply side.

True

Talented individuals have a higher marginal value in larger organizations.

True

The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors.

True

There is no single "going rate" in the labor market for a specific job.

True

Wages in labor-intensive industries are generally lower than in technology intensive industries.

True

What is an example of a quoted-price?

a product on Amazon

Among pay-mix alternatives, ____________is largest in security or commitment.

base pay

Reasons a company might ______________ wages above market competitors: employees are more productive, turnover will be lower, and to attract more job applicants

base pay

The total compensation for a top athlete is an example of a __________.

bourse

An example of a situation where data from labor market competitors would be given more weight than product market competitors' data is when the supply of labor is responsive to _________________

changes in pay

Consequences of level of ________________ of total compensation include increased probability of union-free status, reduced voluntary turnover, and reduced pay-related work stoppages.

competitiveness

Pay level offered by an employer is an example of the _________________

demand side of labor

Rent sharing is most commonly associated with the efficiency wage theory.

efficiency wage theory

The theory that has the most implications for staffing is the ______________

efficiency wage theory

In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the marginal revenue of the last hire is ___________ to the wage rate for that hire.

equal

All of the following shape _______________: nature of demand, industry strategy, and level of product demand.

external competitiveness

Factors affecting an employer's ability to pay __________ include product demand, degree of competition, and productivity of labor.

high wages

The _____________theory is the most influential in explaining pay-level differences.

human capital

The pay policy associated with increased productivity is the _________________

hybrid policy

Employers continue to hire until marginal revenue of the last hire equals their wage rate, because as per the first _______________ assumption employers seek to maximize profits.

labor market theory

A pay policy most likely to reduce pay dissatisfaction is ___________

lead

Advantages of a _____________ policy include reduced turnover, reduced absenteeism, and higher financial performance.

lead pay

The assumption of the upward sloping supply curve may not hold when unemployment is ___________

low

Wages tend to be ___________ in the education and health care industries.

low

Evidence shows that in ____________, productivity is positively correlated with hourly wage level

manufacturing

Output associated with hiring an additional person, holding constant other production factors, is referred to as the ________________.

marginal product of labor

Important factors in defining a __________ for compensation purposes include skill/knowledge required, product acceptance, and product and/or labor market competitors.

market

The _____________ is the point at which supply and demand lines cross.

market pay rate

The most common pay policy is __________

match

The study referred to in the text on how managers make wage adjustment decisions found profitability affected the _______________

overall pay budget

______________refers to the average of the array of rates paid by an employer.

pay level

_______________have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the labor costs.

pay level decisions

The ___________ component in which benefits is likely to be largest is work-life balance.

pay-mix

The ___________ sets a maximum pay level an employer can pay.

product market

Implication of the _______________theory is that pay level affects an employer's ability to recruit.

reservation wage

In _____________ theory, pay is described as non-compensatory

reservation wage

___________________ involves hiring from different sources, paying workers differently that are performing the same work, and employing regulars, part-timers, and temps.

segmented labor supply

If Company A and Company B pay the same total compensation for a job, which of the following is most likely true?

the pay mix differs

The _______________ supports the idea that coal mining should be paid more than office clerical work?

theory of compensating differential

Considering the _________________, although some firms find lowering the job requirements and hiring less-skilled workers a better choice than raising wages, this choice incurs increased training costs.

third assumption of labor market theory

Research on efficiency wage theory shows that more _____________ workers apply

unqualified