MGT 461 Ch. 7

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

False

Employers tend to overestimate the importance of pay to employees and underestimate the role of relationships with the supervisor.

False

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

False

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

False

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

False

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

False

Which of the following is an example of a bourse market? Neurofort, a website that sells surgical equipment in bulk at fixed prices Hardknox, a hardware store that sells all its products at 10 percent above the maximum retail price Needlefarm, a store that sells premium furniture at discounted rates Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods

Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods

Which of the following is an example of the demand side of labor? Level of pay applicants will accept Qualifications of applicants Pay level offered by an employer Locations of potential employees

Pay level offered by an employer

In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors? Labor costs are a small share of total costs. Employee skills are generic across all product markets. Product demand is responsive to price changes. The supply of labor is not responsive to changes in pay.

Product demand is responsive to price changes

Which of the following is NOT true of the relationship between employer size and its ability to pay? Talented individuals have a lower marginal value in a larger organization. Talented people can influence more people and decisions. Influence of talented people leads to more profits. Talented people prefer to work in larger organizations.

Talented individuals have a lower marginal value in a larger organization

_____ puts a lid on the maximum pay level an employer can set. Government legislation The product market The labor market Labor market competition

The product market

_____ is an example of a bourse. The stated starting wage of a job in an ad The total compensation for a top athlete The price of a product on Amazon The price of a box of cereal at a grocery store

The total compensation price for a top athlete

A manager of a company could be a factor affecting the company's external competitiveness.

True

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

True

An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk-taking employees.

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 to offset some of the risk of being fired upon is an example of a lead pay-level policy.

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

True

Research shows that a lead pay strategy reduces turnover.

True

Segmenting sources of labor is a means of reducing labor costs.

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

All of the following are advantages of a lead pay-level policy EXCEPT _____. reduced vacancy rates higher turnover rates reduced absenteeism better-quality employees

higher turnover rate

The _____ theory is the most influential in explaining pay-level differences. human capital marginal productivity efficiency-wage signaling

human capital

Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the: profit margins. labor costs. return on investments. revenues.

labor costs

The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____. lead policy employer of choice policy lag policy match policy

lead policy

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 _____ of the last hire is equal to the _____ for that hire. demand factor; supply factor marginal output; market price incremental output; marginal output marginal revenue; wage rate

marginal revenue; wage rate

The most common pay policy is a(n) _____. lead policy lag policy hybrid policy match policy

match policy

Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level. turnover productivity job description total cost

productivity

Among pay-mix alternatives, the percentage of base pay is highest in _____. work-life balance policy security or commitment policy performance-driven policy market match policy

security or commitment policy

All of the following are important factors in defining a market for compensation purposes EXCEPT: the skill or knowledge required. geography. the ability to pay. product and/or labor market competitors.

the ability to pay

A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____. individual-based pay variable pay flexible benefits job-based pay

variable pay

The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as _____. work/life balance policy security policy performance-driven policy market match policy

work/life balance policy

_____ is the additional output associated with the employment of one additional person, with other production factors held constant. Productivity The marginal product of labor Incremental productivity The marginal revenue of labor

The marginal product of labor

The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy. lead match lag employer of choice

lag

The market pay rate is the: minimum wage rate set by the Department of Labor. pay rate at which applicants will deny a job offer. difference between use value and surplus value. point at which supply and demand lines cross.

point at which supply and demand line cross

_____ refers to the average of the array of rates inside an organization. Revenue margin Remuneration Compensation Pay level

Pay level

Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that: markets are competitive. pay rates reflect all costs of employment. employers seek to maximize profits. workers are homogeneous and interchangeable.

employers seek to maximize profits

The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____. absenteeism is high turnover is low unemployment is low unemployment is high

unemployment is low

Which of the following statements is true of pay level? Pay level is the same across all organizations for the same job. The higher the pay level relative to what competitors pay, the lower the relative costs to provide similar products or services. Pay level is directly proportional to labor costs. Pay level is independent of the number of employees in an organization.

Pay level is directly proportional to labor costs

If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result? The labor costs for Company A will increase, but it will be unable to hire additional workers. Company A will hire the needed workers at a higher wage rate. Competitors of Company A will lose employees to Company A. Company A will hire higher quality workers.

The labor costs for Company A will increase, but it will be unable to hire additional workers

Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true? Druk will break even if it hires a twelfth employee for a wage of $50,000. Druk needs to pay $10,000 as wage to the eleventh employee to break even. Druk will break even if it hires a thirteenth employee for a wage of $10,000. Druk needs to pay $50,000 as wage to the eleventh employee to break even.

Druk needs to pay $50,000 as wage to the eleventh employee to break even

A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees? The productivity will reduce. The productivity will increase. The productivity will remain the same. There is not enough information to determine productivity.

The productivity will reduce

Which of the following is an example of a quoted-price market? Streetcash, a website that allows buyers to negotiate product prices with the sellers Vidwom, a website that allows buyers to bid for items sold by other users Gramspot, a website where cars are auctioned by sellers for charity Nile, a website that allows sellers to sell their products for a fixed price

Nile, a website that allows sellers to sell their products for a fixed price