ECON 227 Final (1)

Efficiency wages are A) designed to increase profits through reduced turnover and increased morale. B) thought to decrease unemployment. C) not profit-maximizing for employers because they are paying more than the market wage. D) the lowest wages at which a firm can hire workers.

A

Studies show that most of a payroll tax is paid by workers in the form of lowered wages. If true, these studies imply A) the supply of labor curve is very steep. B) the supply of labor curve is very flat. C) it would be better if employers were made to pay all of the tax. D) the demand for labor curve is very steep.

A

The rule for optimal human capital investment is that: A) The individual should increase years of education until the discounted present value of the benefits of an additional year of education equals the discounted present value of the additional costs B) The individual should increase years of education until the discounted present value of the benefits of an additional year of education is less than the discounted present value of the additional costs C) The individual should increase years of education until the discounted present value of the benefits of an additional year of education is greater than the discounted present value of the additional costs D) The individual should increase years of education until the discounted present value of the benefits of all of the years of education equals the discounted present value of all of the associated costs

A

Which of the following is NOT a characteristic of a typical positive economic model? A) realistic assumptions B) makes predictions that can be proven false C) the assumption that people weigh the costs and benefits of their various alternatives D) makes assumptions that ignore the complexity of behavior

A

Workers with relatively high levels of natural ability are quite likely to attend college. This can cause ________ bias when estimating educational returns because ________. A) an upward; ability increases earnings B) a downward; ability increases earnings C) an upward; other benefits of college are ignored D) a downward; other benefits of college are ignored

A

A law mandating that unions cut wages in order to create more jobs A) would cause market failure due to price distortion. B) would be Pareto efficient because it would reduce income inequality. C) would be Pareto efficient because no one would lose a job and some would get a job. D) would not be Pareto efficient because such a law would need to be voluntarily accepted by all who are affected by the law.

D

A competitive firm uses two inputs: capital and labor. At its current level of hiring of both inputs, capital's marginal product is 12 while labor's marginal product is 18. Capital's cost (C) is $8 per unit while labor's cost (W) is $9. In the long run, to produce the same output at a lower cost, the firm should A) hire more labor and less capital. B) hire less labor and less capital. C) hire more labor and more capital. D) hire less labor and more capital.

A

In the context of job related risk, the term "value of life" refers to: A) People's willingness to pay to save a person's life B) People's willingness to pay in order to reduce the risk of death from a job-related accident to zero. C) People's willingness to pay to for more leisure time D) The average amount of awards in law suits involving wrongful death

A

Principal-agent theory deals with the problem of: A) Designing an efficient contract between the employer and the employee when there are incentives to cheat or shirk B) Failed negotiations between workers and their employees C) Designing an optimal compensation system to reduce turnover D) All of the above E) None of the above

A

A mandated increase in overtime pay is likely to A) cause employers to reduce overtime hours and convert them into added employment. B) directly reduce the quasi-fixed costs per worker. C) lead to a reduction in employment if higher costs cause a large scale effect. D) lead to a reduction in employment if those who work overtime and those who are unemployed are perfect substitutes.

C

A quasi-fixed cost of labor is a cost that A) is expected to change over time. B) is proportional to the number of hours worked. C) is proportional to the number of workers hired. D) is proportional to the amount of capital used.

C

According to the "lump of labour fallacy": A) Many workers have more than one job B) There are excess jobs available in the economy beyond the rump of regular workers C) There are a fixed number of jobs in the economy regardless of wages D) There is always a situation of high unemployment E) None of the above.

C

If teenagers and adults are substitutes in production, and the wage of teenagers falls, then A) they must be gross substitutes, and the employment of adults will fall. B) they must be gross complements, and the employment of adults will fall. C) they could be either gross substitutes or gross complements, and the employment of adults could rise or fall. D) they must be gross substitutes, and the employment of adults will rise.

C

Occupational discrimination A) occurs when secretaries are paid less than truck drivers. B) is when the distribution of jobs within one group is different from the distribution of jobs within another group. C) is keeping one group in lower-paying jobs although their potential productivity is equal to that of those who have access to higher-paying jobs. D) is the desire of those in one group to work in different jobs than those in another group.

C

Suppose the wages of both high school and college graduates decrease by $2,000 per year. In response to the opportunity cost, the number of people attending college will consequently ________, while in response to the earnings differential between high school and college graduates, college enrollments will ________. A) increase; decrease B) increase; increase C) increase; remain unchanged D) decrease; remain unchanged

C

The workers who will prefer piece-rate pay will usually be A) less present-oriented than average. B) less motivated than average. C) more productive than average. D) more risk-averse than average.

C

There are one hundred jobs and one hundred workers in a competitive job market. All workers are equally productive. All employers dislike female workers but vary by the degree of their dislike. Job one's employer dislikes females by $1 a week, job two's employer by $2 a week, and so forth, such that job one hundred's employer dislikes females by $100 a week. Assume male workers are paid $500 a week. If there are 40 females and 60 males in the labor force, then which of the following is true in the short-run equilibrium? A) Employer 40 will pay a wage of $440 and hire a female. B) Employer 10 will pay a wage of $440 and hire a female. C) Employers of males could increase their monetary profit by hiring females instead. D) All of the above are true.

C

When one breaks down the difference in earnings between men and women into the part due to productivity differences and the part due to discrimination, one produces the: a) The male-female earnings gap b) The equality equilibrium c) The explained-unexplained decomposition d) The market premium e) None of the above

C

Worker X is paid $20,000 more in a dangerous job than what Worker X could make in safe jobs. Worker X values the job characteristic of safety at $15,000. If the government makes Worker X's job safe and if safe jobs continue to pay their current wage, then, assuming markets are competitive and wages can easily adjust A) Worker X will be $20,000 worse off. B) Worker X will be $15,000 better off. C) Worker X will be $5000 worse off. D) Worker X will be $20,000 better off.

C

An employer and a worker, if both are honest and work hard, together produce $200,000 a year, of which the employer gets $50,000 and the worker $150,000. If either one is dishonest and lazy, they break up, the employer employs someone else and the worker gets another employer. The following shows what they might earn if they broke up. In which case is it likely that both the employer and the worker will be honest and hard working? A) if they break up, the employer makes $60,000 and the worker $80,000 B) if they break up, the employer makes $20,000 and the worker $175,000 C) if they break up, the employer makes $75,000 and the worker $175,00 D) if they break up, the employer makes $25,000 and the worker $125,000

D

Because workers choose between various employers offering the same type of job based primarily on wages, A) the market demand curve for chefs is downward sloping. B) the market supply curve for chefs is upward sloping. C) the firm supply curve for chefs is vertical. D) the firm supply curve for chefs is horizontal.

D

If two inputs are gross complements, the cross-wage elasticity of labour demand for the two inputs will be A) zero. B) one. C) positive. D) negative.

D

In a competitive labor market where everyone is covered by the minimum wage, if employment increases when the minimum wage increases, one can conclude A) all other factors affecting employment were not held constant. B) employment would have been even higher in the absence of the minimum wage increase. C) labor and capital are gross complements. D) both A and B

D

In a given market, women with the same skills as men earn less. Which of the following would suggest that the main source of discrimination against women is employers? A) Companies make the same profit whether they hire women or men. B) Male managers who work with women must be paid more. C) Companies hiring women offer more daycare and other job amenities favored by women. D) The companies hiring more women make a larger profit.

D

In the signaling model, assume high school graduates are paid a stream of income whose present value is $200,000. College graduates are paid a stream of income whose present value is X. College education costs higher-productivity workers $50,000 and lower-productivity workers $150,000. What value of X will cause higher-productivity workers to go to college and lower-productivity workers to not go to college? A) $225,000 B) $475,000 C) $700,000 D) $275,000

D

On a graph of wage rates versus risk of injury, indifference curves are steeper to the right because A) risk of injury decreases workers' utility. B) each additional dollar of pay increases utility more than the previous dollar. C) utility is constant on indifference curves. D) at low levels of risk, a worker is less willing to give up wages for increased safety.

D

Which of the following events could explain why wages and employment could fall in a competitive labor market? A) The supply curve shifts left and up. B) The supply curve shifts right and down. C) The demand curve shifts right and up. D) The demand curve shifts left and down.

D

With the assumptions made in the hedonic wage model, Government standards that decrease risk levels in the workplace should establish the allowable risk levels A) to ensure the highest degree of health and safety protection for all workers. B) so that they will not result in higher costs/lower profits for employers. C) by focusing on jobs currently paying the largest compensating wage differentials. D) by weighing the costs of safety programs against the value workers or other beneficiaries attached to the benefits of reduced risk.

D

Workers with firm-specific training are ________ likely to be laid off than are workers with general training because ________. A) more; they are paid less than workers with general training B) more; their wage is less than their marginal product C) less; they are paid less than workers with general training D) less; their wage is less than their marginal product

D

A steeply sloped isoprofit curve, with wages on the vertical axis and risk of injury on the horizontal axis, indicates that A) injury levels can be reduced easily and inexpensively. B) it would be very expensive to increase safety in the workplace. C) the industry is very competitive. D) the industry will pay only small compensating differentials.

B

As income tax rates increase, the advantage of receiving compensation in the form of non- taxable employee benefits increases. Assuming employee benefits are graphed on the horizontal axis and wage earnings on the vertical axis, what effect would income tax rate increases have on the indifference curves between benefits and wages? A) They would become flatter. B) They would become steeper. C) They would not be affected. D) They would eventually become upward sloping.

B

Consider a law that would mandate full health insurance coverage for all employees. Assume that currently most, but not all, full-time employees have health insurance coverage, but that few part-time employees are covered. What effect would there be on the firm's mix of part-time and full-time workers? A) Full-time workers would decrease and part-time workers would decrease since the marginal cost of part-time workers is now higher. B) Full-time workers would increase and part-time workers would decrease since the marginal cost of part-time workers is now higher. C) There would be no change in the mix of part-time and full-time workers since part-time workers are still cheaper than full-time workers. D) Part-time employment would actually increase since more people would now want to work part- time.

B

Fairness in regards to a worker's reference group is important in the labor market because A) workers think it is unfair for employers to earn a profit. B) workers care about their relative treatment. C) employers must supervise most workers closely. D) employers want to maximize profits.

B

For education to serve as a signal, A) education must increase productivity. B) productivity and educational costs must be negatively related. C) productivity and educational costs must be unrelated. D) the acquisition of education must not increase wages.

B

In the Widget industry, it takes two workers (with other inputs) to produce each widget and since consumers demand 1000 widgets at its current price, 2000 workers are employed in the industry. Which of the following could occur if the price of capital falls and labor and capital are substitutes in production? A) It takes 2.2 workers per widget and 1200 widgets are produced and sold. B) It takes 1.9 workers per widget and 1200 widgets are produced and sold. C) It takes 2.2 workers per widget and 900 widgets are produced and sold. D) It takes 1.9 workers per widget and 900 widgets are produced and sold.

B

In the context of measuring gender discrimination, the term "premarket differences" refers to A) the gap between the average wages of men and women. B) differences in the current productive characteristics of men and women. C) the effects on women of past discrimination. D) differences between men and women regarding the "price" each productive characteristic brings in the labor market.

B

Many employees prefer to be paid on the basis of A) output, because it decreases variation of wages. B) time, because it decreases variation of wages. C) output, because it increases variation of wages. D) time, because it increases variation of wages.

B

Present-oriented people discount future earnings ________ forward-looking people. A) at the same rate as B) at a higher rate than C) at a lower rate than D) at a higher or lower rate than

B

Which of these is an example of the FAILURE of the market to achieve economic efficiency? A) Firms and employees successfully achieving all mutually beneficial transactions. B) Alpha Industries is willing to pay $55,000 per year to hire an accountant. Dean, a qualified accountant, would gladly give up his job as a waiter for an accountant job paying at least $45,000, but is unaware of Alpha's opening. C) Laura refuses to quit smoking even though Barb offers her $1 per hour to stop. D) Ace Engineering is willing to pay Diane $11 per hour, but Diane is willing to work for $10 per hour, so Ace hires her for only $10 per hour.

B

Workers in an industry are probably overpaid if A) employers have difficulty hiring and retaining qualified workers. B) the workers cannot afford to quit their jobs. C) the workers could receive a higher salary in another occupation. D) firms in the industry are making a positive profit.

B