ECON 480 Quizzes

At a wage of $25 per hour, the firm employs 50,000 hours of labor per week. If the wage would increase to $27 per hour, the firm would employ 45,000 hours of labor per week. What is the elasticity of labor demand? Be sure to use the midpoint method. A. -1.37. B. -1.25. C. -0.73. D. -0.8. E. -1.50.

A. -1.37.

The positive correlation between ability and human capital investments "stretches out" wages in the population, generating what? A. A positively skewed wage distribution. B. A negatively skewed wage distribution. C. An inconsistent wage distribution. D. A uniform wage distribution. E. A symmetric wage distribution.

A. A positively skewed wage distribution.

Which one of the following conclusions is not supported by the intertemporal substitution hypothesis? A. Hours of work over the life cycle will be inversely related to wages over the life cycle. B. A high wage worker may choose to work 60+ hours a week during her peak wage years in order to retire at a younger age later in life. C. The profile of hours of work over the life cycle will have roughly the same shape as the age-earnings profile. D. Hours of work increase as the wage rises and decline as the wage falls. E. An unemployed person might choose to become a discouraged worker during a low-wage recession with an eye toward returning to the labor market when wages increase.

A. Hours of work over the life cycle will be inversely related to wages over the life cycle.

What type of questions cannot be answered with theory or facts alone? A. Normative questions. B. Positive questions. C. Factual questions. D. Empirical questions. E. Econometric questions.

A. Normative questions.

Consider estimating the effect of hourly wages (w) and nonlabor income (V) on hours worked (H), suppose wages and non-labor income are positively correlated (e.g., people with high wages save more and thus earn more interest income). What would happen if V were omitted from the multiple regression? A. The coefficient on W would become smaller. B. The coefficient on W would become larger. C. The standard error associated with the coefficient on W would become smaller. D. Both b and c.

A. The coefficient on W would become smaller.

How does the presence of an underground labor market bias the government's calculation of the labor force participation rate? A. The official government statistic on labor force participation is too low, because people working in the underground labor market should be counted as participating in the labor market. B. The official government statistic on labor force participation is too high, because people working in the underground labor market should be counted as participating in the labor market. C. The official government statistic on labor force participation is too low, because people working in the underground labor market should not be counted as participating in the labor market. D. The official government statistic on labor force participation is too high, because people working in the underground labor market should not be counted as participating in the labor market. E. The official government statistic on labor force participation is identical to actual labor market participation whether or not there is an underground labor market.

A. The official government statistic on labor force participation is too low, because people working in the underground labor market should be counted as participating in the labor market.

Assuming that workers are fully aware of their working conditions, which of the following will not happen when the government mandates pollution control to protect workers' health? A. Worker utility will increase. B. Employment will decrease. C. The air in workplaces will become cleaner. D. Firms with low-profits before the mandate may shut down or exit the industry. E. Wages will fall at all but the cleanest firms.

A. Worker utility will increase.

Extraordinary earnings of superstars require A. a technology that allows the superstar's output to be mass distributed. B. there to be only one superstar. C. all customers to agree on which potential superstar is the best. D. the superstar's talents to be substantially better than anyone else's talents. E. unification of international markets for the superstar's services.

A. a technology that allows the superstar's output to be mass distributed.

In a competitive market, an increase in the minimum wage will reduce _____ and increase _____. A. employment, wages B. job search costs, wages C. worker turnover, employment D. wages, employment

A. employment, wages

If immigrant workers are complementary to native workers, then A. native workers will be better off with open borders. B. immigrant workers will receive a higher wage than native workers. C. immigration will shift the demand for native labor to the left. D. very few immigrants will find jobs. E. each firm will hire only immigrants or only natives but not a mixture of the two.

A. native workers will be better off with open borders.

If labor is supplied perfectly inelastic, the imposition of a payroll tax legislated to be paid by firms will do all of the following EXCEPT: A. reduce total output. B. generate tax revenue paid to the government. C. reduce the wage rate by exactly the amount of the tax. D. leave firm profits unchanged. E. leave employment levels unchanged.

A. reduce total output.

When the tax rate on wages falls (so that the take-home wage or effective wage increases), the budget line A. rotates out along the consumption axis. B. shifts out, parallel to the old budget line. C. rotates in along the leisure axis. D. shifts in, parallel to the old budget line. E. rotates out along the leisure axis.

A. rotates out along the consumption axis.

A welfare program that gives a cash grant of $X, which decreases by $0.25 for each dollar earned in the labor market, will: A. shift the endowment point up to L=T, C=$X, and for L<T, the budget line will extend from the endowment point to the consumption axis with a slope of -0.75w. B. shift the endowment point up to L=T, C=$X, and for L<T, the budget line will extend from the endowment point to the consumption axis with a slope of -1.25w. C. create a spike in the BC at h=0, L=T hours with height $X, and for h>0, L<T, the BC will rotate down along the consumption axis from the original endowment point. D. shift the endowment point up to L=T, C=$X, and for L<T, the budget line will extend from the endowment point to the consumption axis with a slope of -(w-0.25).

A. shift the endowment point up to L=T, C=$X, and for L<T, the budget line will extend from the endowment point to the consumption axis with a slope of -0.75w.

Assuming consumption and leisure are normal goods, hours worked will fall when the wage increases if A. the income effect dominates the substitution effect. B. the substitution effect dominates the income effect. C. the income and substitution effect move in the same direction (i.e., if they are of the same sign). D. the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign). E. the wage increase is accompanied by an increase in prices.

A. the income effect dominates the substitution effect.

If the short-run labor demand curve is E=500-5w, what is the elasticity of labor demand at a wage of $10 per hour? A. -5 B. -0.11 C. -0.51 D. -0.2 E. -9

B. -0.11

At a wage of $20 per hour, the firm employs 50,000 hours of labor per week. If the wage would increase to $25 per hour, the firm would employ 40,000 hours of labor per week. What is the elasticity of labor demand (be sure to use the midpoint method)? A. -2 B. -1 C. -1.25 D. -0.8

B. -1

When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers? (do NOT use the midpoint method, if this is the method you learned to calculate percent change in ECON101) A. 0.75 B. 0.5 C. 1.0 D. 2.0 E. 1.5

B. 0.5

Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force. Of these, 240,000 are employed and 60,000 are unemployed. What is the unemployment rate? A. 10% B. 20% C. 25% D. 35% E. 40%

B. 20%

When graphing a worker's indifference curves in Probability of Injury (x-axis) versus Wage (y-axis) space, Al's indifference curves are steeper than Pete's indifference curve. In this case: A. Al is more risk-loving than Pete. B. Al requires a greater wage increase than Pete in order to willingly take on more risk. C. Al will end up receiving a higher wage than Pete. D. Both are risk neutral. E. Al will only accept a job if it offers no risk of injury.

B. Al requires a greater wage increase than Pete in order to willingly take on more risk.

What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives non-labor income of $220 per week? A. C = 1,340 B. C + 10L = 1,340 C. L = 10C + 220 D. C - 10L = 900 E. 10C - L = 900

B. C + 10L = 1,340

Suppose the distribution of innate ability is distributed symmetrically throughout a population but that the wage distribution is positively skewed. What most likely explains this? A. A non-competitive labor market. B. Differences in human capital accumulation. C. A regressive tax code. D. Decreased immigration. E. A decreasing Gini coefficient.

B. Differences in human capital accumulation.

Suppose an economy exhibits general conditions of downward sloping labor demand, upward sloping supplies of domestic and immigrant labor, and a competitive labor market. Which of the following is not a likely outcome of immigration? A. Domestic workers will experience some job losses. B. Domestic workers who keep their job will experience an increase in earnings. C. Economic surplus will increase in the destination country, even net of immigrant earnings. D. The market clearing wage will fall. E. Some economic surplus will transfer from domestic workers to domestic firms.

B. Domestic workers who keep their job will experience an increase in earnings.

Which of the following is not a possible explanation as to why wage inequality increased markedly over the last 40 years in the United States? A. There was an increase in the supply of low-skill workers, particularly through immigration. B. Federal legislation allowed employers to legally engage in more racial discrimination. C. Competition from international economies has increased demand for highly productive workers. D. Recent technological changes have been complementary to skilled labor while substituting for unskilled labor. E. Institutional changes in the United States such as a steady decline in union coverage and a falling real minimum wage have led to changes in the wage distribution.

B. Federal legislation allowed employers to legally engage in more racial discrimination.

Any economic model should be judged primarily on: A. How realistic its assumptions are. B. How accurately its predictions match observed behavior. C. How easy the model is to use. D. How many aspects of real-world behavior and choices are incorporated in the model. E. How original the model is compared to other models.

B. How accurately its predictions match observed behavior.

Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1,000 of capital borrowed. Consider the isocost line associated with spending $8,000 per week, and let the y-axis be the amount of capital borrowed in $1,000s. Which of the following is not true? A. If Ally employs no workers, she can borrow $4 million of capital. B. If Ally employs 400 hours of work, she can borrow $3 million of capital. C. The slope of the isocost line is -5. D. If Ally employs 600 hours of work, she can borrow $1 million of capital. E. If Ally borrows no capital, she can employ 800 hours of work.

B. If Ally employs 400 hours of work, she can borrow $3 million of capital.

Suppose a law firm negotiates a very low price for each of its 1,000 employees to be members at the athletic club that is located next to the law firm. Which of the following is not likely to be true? A. The firm can likely negotiate a lower per person price at the gym than each employee could negotiate alone. B. If the typical individual gym membership costs $50 per month, the law firm should expect to save $50,000 per month in wages. C. In the long run, the law firm will probably attract workers who value the gym benefit the most. D. The law firm can pay its workers less than a comparable law firm that does not offer the gym benefit. E. Some employees will take advantage of the gym benefit, while others will not.

B. If the typical individual gym membership costs $50 per month, the law firm should expect to save $50,000 per month in wages.

Large disparities in wages could possibly result from all but which one of the following? A. Parental investment in a child's human capital. B. Increases in the amount of middle class jobs. C. Skill-biased technological change. D. Globalization. E. An increase in the demand for highly skilled labor.

B. Increases in the amount of middle class jobs.

One possible measure of gender discrimination is to look at the difference between the average male wage and the average female wage. This is a poor measure of discrimination for all of the following reasons except: A. Men and women might have different preferences when it comes to supplying labor. B. Men and women may differ in the return they receive for their skills. C. Men and women may differ in their overall level of skill. D. Men and women may differ in their taste for part-time jobs. E. Men and women may differ in their willingness to accept risky jobs.

B. Men and women may differ in the return they receive for their skills.

Which of the following statements about migration is not true? A. Migration is greater among people who like the adventure of moving compared to people who do not like the adventure of moving, because the psychic costs of moving are less for those who enjoy moving. B. Migration is greater among married couples compared to single-person households, because migration costs are less for married couples. C. Migration is greater among younger workers compared to older workers, because older workers have a shorter period in which to benefit from the returns to migration. D. Migration is greater among highly educated workers compared to less educated workers, because the returns to education for highly-educated workers vary much more from location to location than for workers with low levels of education.

B. Migration is greater among married couples compared to single-person households, because migration costs are less for married couples.

Assume the consensus estimate of the elasticity of labor supply among females is 0.4. The interpretation of this estimate is what? A. On average, women will reduce hours of work by 10% when their wage increases by 4%. B. On average, women will increase hours of work by 4% when their wage increases by 10%. C. On average, women will increase hours of work by 1% when their wage increases by 4%. D. On average, women will increase hours of work by 0.4% when their wage increases by 10%. E. On average, women will increase hours of work by 40% when their wage increases by 1%.

B. On average, women will increase hours of work by 4% when their wage increases by 10%.

Which of the following is a normative (rather than a positive) statement? A. The (nominal) minimum wage is $7.25 per hour. B. Public education should be funded primarily at the state level. C. The federal debt exceeds $8 trillion. D. At its peak, unemployment exceeded 10% during the 2007 recession. E. The average wage of high-school dropouts has fallen by 20% since 1970.

B. Public education should be funded primarily at the state level.

Many studies measure inequality with the 90-10, 50-10, or 90-50 wage gaps rather than with the Gini coefficient. Why? A. The Gini coefficient is poorly defined. B. The Gini coefficient is ambiguous in terms of where in the earnings distribution inequality exists. C. The Gini coefficient tends to jump around from one year to the next due to extreme outliers. D. The Gini coefficient is a poor measure of international comparisons of inequality. E. The Gini coefficient fails to take into account the entire wage distribution.

B. The Gini coefficient is ambiguous in terms of where in the earnings distribution inequality exists.

Consider an economy with a particular distribution of income. Over the next 10 years, the income of all households increases by $20,000. How will the Gini coefficient change over those 10 years? A. The Gini coefficient will increase. B. The Gini coefficient will decrease. C. The Gini coefficient will stay the same as all households received the same increase in income. D. The Gini coefficient will become more negative. E. It is impossible to determine how the Gini coefficient will change as it will depend on the original income distribution.

B. The Gini coefficient will decrease.

Expansions in globalization and the reduction of trade barriers world-wide during the 1980s and 1990s most likely had what effect on the demand for U.S. labor? A. The demand for unskilled workers increased, while the demand for skilled workers decreased. B. The demand for unskilled workers decreased, while the demand for skilled workers increased. C. The demand for unskilled and skilled workers increased. D. The demand for unskilled and skilled workers decreased. E. The demand for unskilled workers increased, while the demand for skilled workers didn't change.

B. The demand for unskilled workers decreased, while the demand for skilled workers increased.

Which of the following statements is false? A. The slope of an isoquant is the marginal rate of technical substitution B. The firm wants to be on the highest possible isoquant given their isocost curves. C. isoquants further from the origin indicate higher production quantities. D. The slope of an isocost is the ratio of the wage rate and the rental rate of capital E. Each combination of labor and capital is on one and only one isoquant.

B. The firm wants to be on the highest possible isoquant given their isocost curves

What is implied when the wage-schooling profile is drawn as a concave (i.e., increasing at a decreasing rate) function? A. The marginal return to schooling increases as years of schooling increases. B. The marginal return to schooling is positive but falling as years of schooling increases. C. Average wages fall as years of schooling increases. D. The cost of schooling decreases, but at an increasing rate. E. The cost of schooling increases, but at a decreasing rate.

B. The marginal return to schooling is positive but falling as years of schooling increases.

Which of the following reasons is not a likely explanation as to why college completion rates are greater, on average, for whites than for blacks? A. Post-college wages are higher for whites than for blacks. B. Tuition costs are lower for whites than blacks. C. Whites have access to more financial capital to pay for college than blacks. D. Whites are more able to postpone earnings at age 18 than are blacks. E. Whites have greater access to higher quality public education at the elementary and secondary level.

B. Tuition costs are lower for whites than blacks.

If one looks at U.S. Census data and finds that the average male salary is $43,000 while the average female salary is $38,000, which of the following is not likely to be a significant cause of this difference given U.S. labor market demographics? A. Women are more inclined than men to work part-time. B. Women have less education than men. C. Women and men prefer different kinds of jobs. D. Labor market discrimination. E. On-the-job experience.

B. Women have less education than men.

Selection bias is a problem when trying to estimate the return to education in a standard human capital model. In this context, what does selection bias refer to? A. Having a non-random data sample. B. Workers self-select education levels and jobs based on their abilities and preferences. C. The wage-schooling locus is estimated to have a negative slope. D. Colleges select who they are willing to accept. E. The wage-schooling locus does not have a constant slope.

B. Workers self-select education levels and jobs based on their abilities and preferences.

A piece rate compensation system A. underemphasizes the quantity of output produced. B. attracts and benefits the most able workers. C. inherently hurts minorities. D. decreases a firm's productivity. E. has no disadvantages.

B. attracts and benefits the most able workers.

The intertemporal substitution hypothesis suggests that hours of work should A. steadily increase with age. B. be greatest during peak wage years. C. be greater for women than for men. D. increase during retirement. E. steadily decrease with age.

B. be greatest during peak wage years.

Due to the discouraged worker effect, the labor force participation rate A. increases during a recession. B. decreases during a recession. C. is counter-cyclical. D. over-counts the number of workers wanting a job. E. over-counts the number of workers with a job.

B. decreases during a recession.

When estimating the effect of hourly wages (w) and nonlabor income (V) on hours worked (H), the coefficient on nonlabor income (V) of −0.04 means that A. on average, when a person's wage and nonlabor income both increase by $1, he wishes to work 0.04 hours less. B. on average, when a person's nonlabor income increases by $1, he wishes to work 0.04 hours less, holding all else constant. C. the true value of the parameter associated with the V variable is equal to zero. D. both b and c.

B. on average, when a person's nonlabor income increases by $1, he wishes to work 0.04 hours less, holding all else constant.

A perfectly discriminating monopsonist A. pays the equilibrium wage to all workers. B. pays each worker his or her reservation wage. C. receives zero profit in the long run. D. disregards minimum wage laws. E. faces an increasing value of marginal product curve.

B. pays each worker his or her reservation wage.

The idea of linking public school teacher salaries to student outcomes is basically an attempt to impose a ____________ compensation scheme on teachers. A. time-rate B. piece-rate C. tournament D. profit-sharing E. work-for-pay

B. piece-rate

The reservation wage likely decreases when A. a person gets fired B. preferences change to have a lower MRS C. non-labor income increases D. the price level (of wages and consumption) decreases E. preferences change to have a higher MRS

B. preferences change to have a lower MRS

If unskilled labor and capital are substitutes, A. the price of capital is increasing. B. the cross-elasticity between unskilled labor and capital is positive. C. the demand curve for capital is upward-sloping. D. the price of unskilled labor decreases when the price of capital increases. E. demand for unskilled labor increases when the price of capital decreases.

B. the cross-elasticity between unskilled labor and capital is positive.

One can be reasonably confident a relationship between an independent and a dependent variable has been found if parameter. A. the standard error of the estimated parameter is small. B. the standard error of the estimated parameter is less than half the value of the estimated C. the error term of the least squares regression is random. D. the t-statistic for the estimated parameter is about 0.5.

B. the standard error of the estimated parameter is less than half the value of the estimated

A firm that finds it extremely expensive to monitor the output of each worker will likely pay its workers A. with piece rates. B. with time rates. C. with incentive pay. D. according to how much each worker produces. E. on commission.

B. with time rates.

A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. This equilibrium comes about in part because A. the firm pays workers according to a tournament. B. workers are less likely to shirk when there is a pool of unemployed workers who are willing to take their job. C. the firm agrees to not replace labor with capital. D. workers are unaware of the pool of unemployed workers as long as they keep their job. E. workers will do anything to be paid a higher wage.

B. workers are less likely to shirk when there is a pool of unemployed workers who are willing to take their job.

Paula is considering going to law school. If she does, she will spend $60,000 on tuition and books to get a college education (during the first time period), $120,000 on tuition and books to get a law degree (during the second time period), and her law degree will earn her $620,000 during the remainder of her work-life (during the third time period). Paula's time preference for money is associated with a per-period interest rate of 20 percent. Approximately what is Paula's present value of obtaining a law degree? A. $100,100 B. $210,400 C. $270,500 D. $440,000 E. $621,900

C. $270,500

If the short-run labor demand curve is E=500-5w, what is the elasticity of labor demand at a wage of $10 per hour? A. -9 B. -5 C. -0.11 D. -0.2 E. -0.51

C. -0.11

Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force. Of these, 240,000 are employed and 60,000 are unemployed. Of the 200,000 workers not in the labor force, 20,000 want jobs but have given up looking for one. What is the unemployment rate if discouraged workers (i.e., the hidden unemployed) are counted as being unemployed? A. 10% B. 20% C. 25% D. 48% E. 60%

C. 25%

What is an example of general job training? A. Reading a book on techniques for managing large groups of workers involved on team projects. B. Learning how to weld. C. All of the above. D. Attending an industry convention on "best practices." E. Learning how to use a forklift.

C. All of the above.

Assume whites and blacks are equally productive. The going wage for whites is $16 per hour, while the going wage for blacks is $10 per hour. Which of the following will characterize the labor market equilibrium when some employers have discriminatory preferences against hiring black workers? A. All discriminating employers will hire only whites. B. All firms will earn the same amount of profit regardless of their discriminatory preferences. C. Any employer with a discrimination coefficient greater than 0.6 will hire only white workers. D. Any employer with a discrimination coefficient greater than 1.6 will hire only black workers. E. Any employer with a positive discrimination coefficient will hire only white workers.

C. Any employer with a discrimination coefficient greater than 0.6 will hire only white workers.

What is the main theoretical implication regarding the standard employer-based discrimination model? A. Most firms are discriminatory. B. Workers don't care if firms are discriminatory. C. Discrimination is not profitable. D. Discrimination can only occur if there are exactly two types of labor (e.g., white and black). E. Discrimination can only occur in competitive labor markets.

C. Discrimination is not profitable.

Which of the following is not likely to prevent some people from migrating? A. Some people don't want to leave their family and friends. B. Having a spouse who has a very well-paying job in the current location. C. Having a lucrative job offer in a different city. D. Having a teenage child who does not want to change high schools. E. Some people face high financial costs associated with migrating.

C. Having a lucrative job offer in a different city.

What is an example of specific job training? A. Becoming stronger. B. Learning word-processing skills. C. Learning how to use the firm's payroll system. D. Obtaining a GED. E. Passing the CPA exam.

C. Learning how to use the firm's payroll system.

What is not true when thinking of the firm's objective as a cost-minimization problem rather than as a profit-maximization problem? A. The slope at any point on any isoquant reveals the marginal rate of technical substitution. B. The firm chooses labor and capital to minimize its costs. C. The firm chooses a particular level of output to produce. D. The price of the output good never enters the decision as to how much labor or capital to employ. E. The firm will choose labor and capital inputs so that the marginal productivity of labor relative to the marginal productivity of capital equals the price of labor relative to the price of capital.

C. The firm chooses a particular level of output to produce.

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate? A. The firm will demand less capital due to the substitution effect. B. The firm will demand more labor due to the substitution effect. C. The firm will produce less output due to the scale effect. D. The firm will demand more capital due to the scale effect. E. The firm will demand more labor due to the scale effect.

C. The firm will produce less output due to the scale effect.

When the government imposes safety regulations on a particular job or labor market, what is most likely to happen? A. Wages will increase. B. Utility will increase if workers are able to correctly evaluate working conditions. C. Wages will fall but utility will increase if workers misperceive on-the-job risk. D. Employment will increase. E. Firms that used to offer bad working conditions will be required to shut down.

C. Wages will fall but utility will increase if workers misperceive on-the-job risk.

A monopsonist is A. a firm with partial control over an industry. B. a firm operating in a regulated industry. C. a firm that is the single purchaser of a factor of production. D. a firm that competes for labor but sells its output in a non-competitive market. E. a group of firms, much like a cartel, that restricts the demand for labor in a market.

C. a firm that is the single purchaser of a factor of production.

The optimal efficiency wage requires A. firms to pay the competitive wage. B. firms to pay any wage above the competitive wage. C. firms to pay the unique wage above the competitive wage such that the elasticity of output with respect to wages equals one. D. firms to pay fringe benefits. E. the total product curve to be downward sloping.

C. firms to pay the unique wage above the competitive wage such that the elasticity of output with respect to wages equals one.

Monopsony may induce workers to organize in a union because a union can A. raise the value of the marginal product of labor and therefore the wage rate B. increase the labor supply dramatically C. fix the wage rate at which labor will be offered so the marginal cost of labor is constant to the monopsonist D. provide labor of higher quality to the firm E. prevent nonunion workers from taking their jobs

C. fix the wage rate at which labor will be offered so the marginal cost of labor is constant to the monopsonist

Which of the following will increase the value of attaining a college degree in the human capital model? A. increased earnings for those with a high school degree B. increased tuition costs C. increased expected career length D. increased interest rates

C. increased expected career length

The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to A. randomly match workers to jobs. B. match workers who dislike risk to the highest paying jobs. C. match workers who dislike risk to firms that find it cheapest to offer safe jobs. D. have firms that face a high cost of offering safe jobs to pay the lowest wages. E. have firms randomly choose their level of safety.

C. match workers who dislike risk to firms that find it cheapest to offer safe jobs.

When forming theories, economists must be careful to A. include all known facts and details. B. omit crucial factors. C. mirror the real world as realistically but as simply as possible. D. consider historical behavior and policies. E. limit the analysis to two variables.

C. mirror the real world as realistically but as simply as possible.

Multiple regression analysis uses A. data from several time periods B. more than one error term C. more than one independent variable D. data from multiple people E. more than one dependent variable

C. more than one independent variable

If ability is positively related to schooling, then estimating the returns to education directly from the wage-schooling profile will likely A. under-estimate the average wage. B. over-estimate the average wage. C. over-estimate the return to schooling. D. under-estimate the average discount rate. E. under-estimate the return to schooling.

C. over-estimate the return to schooling.

A potential implication of OSHA regulation is that A. the most risk averse workers begin working the riskiest jobs. B. the hedonic wage function may no longer exist at the safest levels. C. the hedonic wage function may no longer exist at the riskiest levels. D. average wages increase. E. for the same amount of output produced, total production costs will be less.

C. the hedonic wage function may no longer exist at the riskiest levels.

In the standard Becker model of discrimination, each firm is associated with a discrimination coefficient of d > 0 and acts as if the wage paid to blacks is wB(1+d) where wB is the actual hourly wage paid to blacks. In equilibrium, a threshold level of d, labeled d*, comes about that sorts firms based on hiring decisions. Which of the following is not an outcome of this model? A. All firms with d ≠ d* will employ all blacks or all whites. B. Profits fall as d increases as long as d < d*. C. In the long run, discrimination will be competed away in a competitive labor market. D. All discriminating firms hire only white workers. E. All firms with d > d* earn the same amount of profit.

D. All discriminating firms hire only white workers.

Economic theory suggests that discriminating employers will be driven from the marketplace when the output market is competitive. Why? A. Customers will refuse to purchase from a discriminating employer. B. Workers will refuse to work for a discriminating employer. C. The government mandates that the employer not act on his or her desire to discriminate. D. Discrimination imposes an additional cost on the employer; and high-cost firms are eventually driven out of a competitive output market. E. A competitive output market requires all workers to be paid the same wage.

D. Discrimination imposes an additional cost on the employer; and high-cost firms are eventually driven out of a competitive output market.

Which of the following statements is false? A. Profit sharing redistributes profits back to the workers. B. Bonuses are frequently linked to performance. C. Bonuses are paid in addition to base salary. D. Free-riding can result from a compensation scheme that gives competitive individual bonuses. E. Free-riding can result from profit sharing.

D. Free-riding can result from a compensation scheme that gives competitive individual bonuses.

Chris and Jordan are a two-person household. Chris's market hourly wage is $40, but Chris can also produce $20 of household production each hour. Jordan's market hourly wage is $50, but Jordan can also produce $30 of household production each hour. This household chooses work schedules to maximize utility. When it does this, which of the following cannot occur? A. All of the above results can happen. B. Chris specializes in marketplace work while Jordan specializes in household production. C. Chris specializes in marketplace work, while Jordan splits time between marketplace and household work. D. Jordan specializes in marketplace work, while Chris splits time between marketplace and household work. E. Jordan specializes in household production, while Chris specializes in marketplace work.

D. Jordan specializes in marketplace work, while Chris splits time between marketplace and household work.

Which of the following statements about self-selection and immigration flows into the United States is false? A. Negative selection results in low skilled workers coming to the United States. B. Positive selection results in highly skilled workers coming to the United States. C. If the flow of immigrants is currently positively selected, increasing the costs to immigration will likely make the future flow of immigrants even more positively selected. D. Negative selection occurs when the United States offers a greater return to skill at high skill levels than the source country. E. High-skilled workers in foreign countries will not always choose to migrate to the United States.

D. Negative selection occurs when the United States offers a greater return to skill at high skill levels than the source country.

The Human Resources department at a firm has two job candidates for one position. Both candidates went to the same college, took the same classes and have the same academic record. They both performed well in the interview and said that they see the job as a long-term position. One applicant is male; the other is female. Historically within the firm, women quit their jobs at higher rates than do men. Because of this, the firm fills the position with the male candidate. What kind of discrimination is this? A. Employee discrimination. B. Consumer discrimination. C. Employer discrimination. D. Statistical discrimination. E. None of the above.

D. Statistical discrimination.

Which of the following measures would best allow one to compare the relative wealth of poor households to the typical household in an economy? A. The perfect-equality Lorenz curve. B. The Gini coefficient. C. The 90-10 wage gap. D. The 50-10 wage gap. E. The 90-50 wage gap.

D. The 50-10 wage gap.

What is the most accurate description of the value of a worker to the firm? A. The wage. B. The firm's total output when holding capital fixed. C. The firm's average product when holding capital fixed. D. The dollar value of the worker's output. E. The dollar value of the average worker's output.

D. The dollar value of the worker's output.

Consider a firm that discriminates against blacks with a discrimination coefficient of 0.25 and against hispanics with a discrimination coefficient of .5. The firm faces hourly wage rates of $20 for whites, $16 for blacks, and $14 for Hispanics. Which of the following describes the firm's hiring decision? A. The firm hires all white workers. B. The firm hires all black workers. C. The firm hires all Hispanic workers. D. The firm hires a mixture of white and black workers. E. The firm hires a mixture of white and Hispanic workers.

D. The firm hires a mixture of white and black workers.

If the supply of unskilled domestic labor and the supply of unskilled immigrant labor are both perfectly inelastic, then the typical market equilibrium will be such that: A. The perfectly inelastic supply of unskilled domestic labor will prevent the hiring of any unskilled immigrant labor. B. Labor demand will shift out with increased immigration. C. The post-immigration equilibrium will be associated with lower wages being paid to the unskilled immigrants compared to the wages paid to unskilled domestic labor. D. Wages paid to unskilled domestic labor will be less under immigration than under no immigration. E. Immigrant labor will replace domestic labor.

D. Wages paid to unskilled domestic labor will be less under immigration than under no immigration.

Which of the following is not true regarding the incentives different pay structures impose on workers? A. Piece rates are an option when individual output is easily measured by firms. B. Tournaments can elicit more effort than a time rate. C. Worker effort can be a function of the pay structure. D. Worker productivity is unrelated to the pay structure. E. Profit sharing is a pay structure designed to elicit more effort from workers, but it can suffer from free-riding.

D. Worker productivity is unrelated to the pay structure.

Which of the following would prevent a single equilibrium wage existing across all labor markets? A. A competitive labor market. B. Firms being free to enter any of the labor markets. C. A payroll tax paid equally by workers and firms. D. Workers having various skills and preferences. E. Potential workers being able to freely enter any of the labor markets.

D. Workers having various skills and preferences.

In Probability of Injury (x-axis) versus Wage (y-axis) space, isoprofit curves slope upward because A. profits increase with the number of workers the firm employs. B. workers are willing to accept a lower wage in exchange for a riskier work environment. C. the firm does not like to pay higher wages. D. in order to keep profits constant, a higher wage must be offset by the firm saving money by not investing as much in preventing on-the-job injuries. E. profits are constant with respect to risk.

D. in order to keep profits constant, a higher wage must be offset by the firm saving money by not investing as much in preventing on-the-job injuries.

When the government imposes a payroll tax on workers, A. the costs of hiring remain constant. B. workers' real wages are unchanged. C. the labor supply curve shifts to the right. D. the effects are identical to the effects had the government imposed the tax on employers. E. total employment remains constant.

D. the effects are identical to the effects had the government imposed the tax on employers.

Labor demand is more elastic the greater the elasticity of demand for the firm's output because A. the firm will want to hire fewer workers when the wage rate increases. B. capital is usually price elastic. C. the firm's output price falls when the firm produces less output. D. the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good. E. a firm that operates in a competitive output market cannot lower its price.

D. the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good.

Suppose 1 in 200 pilots flying Space-X aircraft dies each year while only 1 in 500 pilots flying Subspace Gliders dies each year. Moreover, the average salary of Space-X pilots is $115,000, while the average salary of Subspace Glider pilots is $109,000. Given this information, what is the implied statistical value of a life of a pilot? A. $6,000 B. $120,000 C. $480,000 D. $1,200,000 E. $2,000,000

E. $2,000,000

In order to use schooling as a signal: A. The signal must be more costly for low-skilled workers than for high-skilled workers. B. The cost of purchasing the signal must not be so costly that high-skilled workers don't value obtaining it. C. Firms must be able to easily verify each worker's amount of schooling. D. Some people must choose to not complete schooling. E. All of the above are required for schooling to serve as a signal.

E. All of the above are required for schooling to serve as a signal.

People decide how much schooling to receive based on: A. The present value of expected future earnings. B. The marginal rate of return to schooling. C. Their discount rate. D. Their ability to succeed in education programs. E. All of the above factors influence how much schooling one receives.

E. All of the above factors influence how much schooling one receives.

Labor demand is more elastic A. the greater is the supply elasticity of capital. B. the greater is labor's share in total costs. C. the greater is the elasticity of substitution between labor and capital. D. the greater is the elasticity of demand for the firm's output. E. All of the above.

E. All of the above.

Wage differentials across individual workers are determined in part by: A. Effort. B. Social capital. C. Luck. D. Productivity. E. All of the above.

E. All of the above.

Wage differentials across individual workers are determined in part by: \ A. Effort. B. Productivity. C. Social capital. D. Luck. E. All of the above.

E. All of the above.

Which of the following is not likely to help a firm motivate its workers to put forth more effort? A. Providing a free or subsidized company gym and/or cafeteria. B. Installing monitoring equipment. C. Providing competitive year-end bonuses. D. Implementing a profit-sharing scheme. E. All of these are likely to motivate workers to put forth more effort.

E. All of these are likely to motivate workers to put forth more effort.

Which of the following would result in a short-run increase in the wage rate in a competitive labor market? A. A decrease in productivity. B. An increase in immigration. C. An increase in native labor supply. D. A decrease in labor demand. E. An increase in the output price.

E. An increase in the output price.

Which of the following is not a property of standard indifference curves in a leisure-consumption model? A. Indifference curves tend to be downward sloping. B. Higher indifference curves (to the northeast) indicate higher levels of utility. C. Indifference curves tend to be convex to the origin. D. There is an indifference curve passing through every leisure-consumption bundle. E. Indifference curves intersect one another.

E. Indifference curves intersect one another.

If unskilled domestic labor and unskilled immigrant labor are substitutes in the production process, then a more open immigration policy will likely result in all but which of the following? A. The total market supply of unskilled labor shifts out. B. The market-clearing wage for unskilled labor decreases. C. Total employment of unskilled labor increases. D. The wage received by unskilled native workers decreases. E. The demand curve for unskilled labor shifts up (out).

E. The demand curve for unskilled labor shifts up (out).

Owners of men's clothing stores traditionally discriminate against males when making hiring decisions because they believe that male customers are more eager to buy clothing from female associates. In reality, however, one's sex does not affect one's sales (i.e., one's sex does not affect one's productivity). Discrimination of this sort throughout the labor market has resulted in clothing stores paying male associates lower wages than they pay female associates. A new men's clothing store enters the industry without these prejudicial beliefs. Which of the following outcomes is not likely to come about? A. The new store will hire more male associates than the typical existing store. B. The new store will make greater profit than it would if it would hold similarly biased views. C. The new store will have lower per-employee labor costs than existing stores. D. The new store will likely have lower prices than existing stores. E. The new store will have to hire female associates to compete with its competition.

E. The new store will have to hire female associates to compete with its competition.

What would a person do if the market wage is less than his or her reservation wage? A. The person will enter the labor market. B. The person will work as much as possible. C. The person will work more hours as the wage falls further. D. The person will be unemployed. E. The person will not participate in the labor force.

E. The person will not participate in the labor force.

Suppose there is currently positive selection of immigrants to the United States. What would happen to immigration to the U.S. if the return to skills were to fall in the United States? A. The same selection of immigrants would continue to come to the United States. B. The selection of immigrants to the United States would switch from being positive to being negative. C. The selection would remain positive but with more workers immigrating to the United States. D. The selection would remain positive, but the average skills of immigrants would fall. E. The selection would remain positive, but the average skills of immigrants would increase.

E. The selection would remain positive, but the average skills of immigrants would increase.

Suppose there is currently positive selection of immigrants to the United States. What would happen to immigration to the U.S. if the return to skills were to fall in the United States? A. The selection of immigrants to the United States would switch from being positive to being negative. B. The same selection of immigrants would continue to come to the United States. C. The selection would remain positive but with more workers immigrating to the United States. D. The selection would remain positive, but the average skills of immigrants would fall. E. The selection would remain positive, but the average skills of immigrants would increase.

E. The selection would remain positive, but the average skills of immigrants would increase.

A firm that discriminates against black labor will certainly A. hire all white workers. B. hire all black workers. C. hire no workers. D. hire a mix of black and white workers. E. earn less profit than it could earn if it did not discriminate.

E. earn less profit than it could earn if it did not discriminate.

If native workers and immigrants are substitutes, then A. native workers will be better off with open borders. B. native workers will encourage immigration. C. native firms will discourage immigration. D. immigrant workers will receive a higher wage than native workers. E. immigration will shift the labor supply curve to the right.

E. immigration will shift the labor supply curve to the right.