econ 380 chp8

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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.

In which of the following locations, compensating wage differentials are most likely to be paid? (Select all that apply.)

Cities with high housing prices Smaller towns, with few amenities Cities with a higher cost of living

______ 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

Which of the following are reasons for noncompeting groups to exist in labor markets? (Select all that apply.)

Different levels of education Different innate abilities

Which of the following wage differentials may occur under conditions of imperfect, costly information? (Select all that apply.)

Equilibrium differentials Transitional 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 are other job heterogeneities that cause wage differentials and cannot be explained by compensating differentials, skill differentials, or equilibrium differentials? (Select all that apply.)

Firm size Union status Tendency of firms to discriminate

Which of the following are labor immobilities that can create wage differentials? (Select all that apply.)

Geographic immobilities Institutional immobilities Sociological immobilities

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 workers have to work for long hours Jobs in which unemployment is more likely Jobs in which compensations are paid at irregular intervals

Which of the following are sources of compensating wage differentials? (Select all that apply.)

Lower possibility of wage advancement Lower fringe benefits Higher risk of being injured or killed on the job Less than ideal job location Poor job status Lower job security

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's indifference curve is tangent to an employer's isoprofit curve. The worker reaches the highest possible indifference curve.

The turnover model suggest that higher wages reduce hiring and training costs, making the wage differential _____.

an equilibrium differential

The hedonic theory of wages assumes _____.

both jobs and workers are heterogeneous

Isoprofit curves are generally _____ because additional reductions in the "bad" cost more than previous reductions.

concave to the origin

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

In a labor market with homogeneous workers, perfect mobility, and competition, wages in different sub-markets will be _____.

equal in both submartkets

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

In a labor market with homogeneous workers, perfect mobility, and competition, when the wage in one submarket is higher than in another submarket, supply will _____ in the market with the higher wage and ______ in the market with a lower wage.

increase; decrease

Restrictions on mobility imposed by the government are considered to be _____.

institutional immobilities

Compensating wage differentials cause differing _____.

labor supply curves

Several studies indicate that _______ firms pay higher wages and salaries in general than smaller firms. (Enter one word in the blank.)

large

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

Which of the following are true of compensating wage differentials? (Select all that apply.)

lower job status

Employers pay compensating wage differentials when there are aspects in a job that _____.

make it undesirable compared to other jobs

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 _____.

pay a compensating wage differential to 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

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

The greater the risk of being injured or killed on the job, _____.

the less the labor supply to a particular occupation

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

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

Jobs that require higher skill levels often pay more _____.

to compensate for the cost of acquiring the additional skills

promote worker mobility that eventually reduces wage disparities. (Enter one word in each blank.)

transitional, wage, differentials

Which of the following are the implications of imperfect and costly information? (Select all that apply.)

Long-run supply adjustments to wage differentials created by changes in demand are likely to be slow. Wage differences within occupations do not evoke job switching.

Which of the following are true of compensating wage differentials? (Select all that apply.)

They are equilibrium wage differentials because they do not cause workers to shift to the higher-paying jobs. They are also called wage premiums.

In the hedonic theory of wages, indifference curves are mapped as a trade-off between _____.

a "good" and the absence of a "bad"

An investment banker who expects pay increases over time will likely receive _____ than a carpenter, who expects few pay increases and therefore requires a compensating wage differential.

a lower initial salary

The skill differential will be the amount of wage differential where the internal rate of return to skill building is _____ the market rate of interest.

equal to

When comparing two firms hiring similar workers, workers will require a compensating wage differential from the one with _____.

fewer fringe benefits

Restrictions on mobility because a person wants to stay close to their family are _____.

geographic immobilities

The indifference curves in the hedonic show various combinations of wages and varying levels of the absence of a "bad" that _____.

give the same utility

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

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.)

heterogeneous; job

On an indifference map, a higher indifference curve indicates _____ utility.

higher

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

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.

According to the hedonic theory of wages, workers will maximize net utility by exchanging _____.

something that produces utility to reduce something that yields disutility


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