ECON 360 FINAL EXAM
Which of the following factors does NOT determine the market rate of return to education? Direct costs of education All of the choices answer the question. Future earnings Foregone income Interest rate
All of the choices answer the question.
Why do employers have an interest in paying their workers some of their compensation in the form of non-wage benefits? Because the government pays part of the compensation package. Because they increase certain work incentives and unwanted turnovers. Because they reduce the costs of the compensation package that the employers pay. Because they serve to reduce unwanted turnover and provide certain work incentives. Because they can reduce unwanted turnovers and certain work incentives.
Because they serve to reduce unwanted turnover and provide certain work incentives.
How do employers typically finance training? By paying workers a wage which is greater than the value of the marginal product during the early stages of the employment relationship. By paying workers a wage which is lower than the value of the marginal product during the early stages of the employment relationship. By paying workers a wage which is greater than the value of the marginal product during the later stages of the employment relationship. By charging the new employee/trainees an upfront, out-of-pocket fee. By paying workers a wage which is lower than the value of the marginal product during the later stages of the employment relationship.
By paying workers a wage which is lower than the value of the marginal product during the early stages of the employment relationship.
Private costs and benefits are those that are: accrued or incurred by the parties investing in human capital. not entered into the calculation of the value of human capital. accrued or incurred by society. external to the decision of investing in human capital.
accrued or incurred by the parties investing in human capital.
In the absence of _________, general training will be financed by the employees. government subsidies specific human capital bonding arrangements job market signalling
bonding arrangements
Which of the following statements is true? The burden of a payroll tax is paid: by workers if the supply of labour is perfectly elastic. by workers if the demand for labour is perfectly inelastic. by both workers and firms if the elasticities of demand and supply of labour are between zero and infinity. indeterminate. by firms if they are legally responsible for remitting the tax to the government.
by both workers and firms if the elasticities of demand and supply of labour are between zero and infinity.
After the imposition of minimum wage, monopsonist's profits will: decrease increase remain the same Rising as fast as the marginal cost equal to zero
decrease
When some important variables that enter into economic decision making are not observable until after a decision has taken place, firms are said to operate in an environment of: imperfect competition in the input market. market equilibrium. imperfect competition in the output market. imperfect information.
imperfect information.
Under what conditions might one expect wages to be above the prevailing competitive levels? only in the case where the employer is a monopolist in the product market only in the case where a union exists only in cases in which the employer has market power in the labour market only in cases in which the employer has market power in the product market in cases in which the employer is a monopolist, an oligopolist, or a monopolistic competitor in the output market
in cases in which the employer is a monopolist, an oligopolist, or a monopolistic competitor in the output market
If quasi-fixed labour costs are very high, employers may try to meet their labour demand needs by: starting a work-sharing program hiring more workers. hiring less workers Increasing the intensity of work effort making their existing workers work overtime
making their existing workers work overtime
Layoff rates are much higher among low-skilled workers compared to high-skilled workers because: The quasi-fixed labour costs of low-skilled workers are higher. The quasi-fixed labour costs of low-skilled workers are lower. High-skilled workers have a smaller wedge or buffer between their marginal revenue product and their wage. Low-skilled workers tend not to work as hard as high-skilled workers. Hiring and training costs are significantly higher for high-skilled workers.
Hiring and training costs are significantly higher for high-skilled workers.
What has empirical research on the incidence of the payroll tax found? That the burden is shared almost equally between firms and workers That there is no burden at all because the tax is free That most of the burden falls upon workers That payroll taxes are "job killers" That most of the burden falls upon firms
That most of the burden falls upon workers
Assume that at the wage rate of $10 per hour, a firm is hiring 100 hours of labour per week. If the wage elasticity of demand is -1.2, how many hours of labour will the firm shed if the wage increases by $2 per hour? 20 hours per week 5 hours per week 36 hours per week 12 hours per week 24 hours per week
24 hours per week
Which of the following facts are correct regarding international comparison of labour costs and productivity? Canada's unit labour costs are lower than that of the United States. Canada's compensation costs are relatively high compared to other European countries. Canada has relatively low productivity growth since 1990s compared to many other European countries. Canada's unit labour costs are much lower since 1990s due to the increase of productivity. Canada has relatively higher productivity growth since 1990s compared to many other European countries.
Canada has relatively low productivity growth since 1990s compared to many other European countries.
In the short run, the demand for labour for a competitive firm is: perfectly elastic at the market wage. perfectly inelastic at the market wage. the marginal product of labour curve. the value of the marginal product curve. the downward sloping portion of the value of the marginal product curve.
the downward sloping portion of the value of the marginal product curve.
The opportunity cost of obtaining human capital is: the estimate of the increase in salary that results from the acquisition of skills. the direct cost of books, supplies, and tuition fees. the income foregone while acquiring it. the job experience lost while attending school.
the income foregone while acquiring it.
For labour demand choices, the long run is defined as: the period of time over which all inputs can vary. the period of time over which fixed factors cannot vary. the period of time over which variable factors can vary. the period of time over which variable factors cannot vary. the time period over which all costs are fixed.
the period of time over which all inputs can vary.
In the context of investments in human capital, perfect capital markets imply all of the following, except that: An individual considering an investment in human capital does not have to be concerned with the timing of expenditures. An individual considering an investment in human capital does not have to be concerned with the timing of income. An individual makes an investment decision based on his/her current income. An individual can base his/her human capital decision on total lifetime income. An individual faces no liquidity constraints as they can borrow against expected future income.
An individual makes an investment decision based on his/her current income.
What is the impact of an increase in the magnitude of quasi-fixed labour costs on the demand curve for labour? The demand curve shifts downwards and to the left. The demand curve shifts upwards and to the right. The demand curve becomes more elastic. The demand curve becomes less elastic. There is no change to the demand curve.
The demand curve shifts downwards and to the left.
When labour costs are quasi-fixed, then which of the following statements are true? They are fixed in the short run but variable in the long run. They are independent of the number of hours worked by a firm's workforce. The employer has committed to them in a contract. They are fixed in the long run but variable in the short run. They are dependent on the number of hours worked by a firm's workforce.
They are independent of the number of hours worked by a firm's workforce.
If the government sets a minimum wage for workers that is above the competitive wage, Wages would fall as firms try to reduce labour costs. The total wage bill must rise. The total wage bill must fall. Unemployment would decrease through a disemployment effect. Unemployment would increase through a disemployment effect.
Unemployment would increase through a disemployment effect.
The supply of labour to an industry is generally upward sloping because: It is more profitable for firms to hire more workers when labour is cheap. There are many workers working for an industry. The wage elasticity of labour supply is elastic. Workers are more willing to work when there are added incentives in the form of higher wages. The substitution effect and the scale effect of a wage change work in the same direction.
Workers are more willing to work when there are added incentives in the form of higher wages.
All of the following are factors contributing to the rise in the proportion of the labour force hired by temporary-help agencies, except that: Employers can avoid hoarding excess labour. Employers require the services of an employee for only a short period. Employers seek to develop stable, loyal, and productive labour forces. Employers need to replace a permanent employee who is temporarily absent. Employers seek to reduce quasi-fixed labour costs.
Employers seek to develop stable, loyal, and productive labour forces.
Which of the following statements regarding the demand for labour is false? If a firm is a monopolist in the product market, it may still behave as a wage taker in the labour market. If a firm is a monopolist in the product market, the firm's demand for labour is the same as the industry's demand for labour. If the firm is an monopolist in the product market, the firm's demand curve is flatter than it would be if the firm were operating in a perfectly competitive product market. If a firm is a monopolist in the product market, the firm's demand curve is more elastic than it would be if the firm were operating in a perfectly competitive product market. If a firm is a monopolist in the product market, it may or may not pay wages which are higher than the case in which the firm operates in a competitive output market.
If a firm is a monopolist in the product market, the firm's demand curve is more elastic than it would be if the firm were operating in a perfectly competitive product market.
Which of the following is correct regarding the elasticity of labour demand? None of the choices are correct. If the product demand is elastic, the derived demand for labour will be inelastic. If the share of the labour costs in total costs is large, the derived demand for labour will be inelastic. If the supply of substitute inputs is inelastic, the derived demand for labour will be inelastic. If capital and labour are easily substitutable, the derived demand for labour will be inelastic.
If the supply of substitute inputs is inelastic, the derived demand for labour will be inelastic.
In the context of quasi-fixed labour costs, the "buffer" refers to a gap between the value of the marginal revenue product of a worker and his/her wage. Which of the following statements is false? It is consistent with labour hoarding behaviour on the part of firms. The buffer is created by the presence of quasi-fixed labour costs. When labour demand falls, employment might not fall by as much. None of the choices are correct. When labour demand rises, employment might not rise by as much.
None of the choices are correct.
In order to obtain the substitution effect of a wage change: One moves either up or down the labour demand curve. One traces the change in output as firms respond to it. One traces the change in the quantity demanded of labour by moving along an isoquant curve as the prices change. One traces the change of the quantity demanded of labour through a parallel shift in the isocost line. One needs to first know the wage elasticity of demand for labour.
One traces the change in the quantity demanded of labour by moving along an isoquant curve as the prices change.
In order to obtain the scale effect of a wage change: One traces the change in output as firms respond to it. One traces the change in the quantity demanded of labour by moving along an isoquant curve as the prices change. One traces the change of the quantity demanded of labour through a parallel shift in the isocost line. One needs to first know the wage elasticity of demand for labour. One moves either up or down the labour demand curve.
One traces the change of the quantity demanded of labour through a parallel shift in the isocost line.
It is not necessarily the case that Canadian workers are doomed to hold "bad" jobs as all of the "good" jobs are outsourced to countries with cheap labour. Which of the following related statements is false? While Canadian labour is often expensive compared to foreign labour, it is often much more productive. Canadian employers always have an incentive to seek out the lowest-cost labour and send the work there. One has to consider the unit labour costs in the two countries. It is not clear that Canadian and foreign labour are substitutes in production. Outsourcing typically lowers the costs of production, which can lower the prices that Canadian consumers pay for certain goods, thereby permitting an increase in spending on other goods.
Canadian employers always have an incentive to seek out the lowest-cost labour and send the work there.
According to the signaling theory of education, The level of education or training directly measures the productivity of the worker. Education and training function as utility-generating goods from the worker's perspective. The social rate of return to education is greater than the private rate of return. The level of education or training of one worker affects the productivity of her coworkers. Education and training do not contribute directly to productivity, but act as a filter to screen candidates.
Education and training do not contribute directly to productivity, but act as a filter to screen candidates.
In the long run, which of the following statements is false? MPL = MPK. W = VMPL and r = VMPK. VMPL/VMPK = w/r. Profits are maximized. MPL/MPK = w/r.
MPL = MPK.
Suppose a government seeks to reduce the extent to which firms have their workers put in overtime hours. Which of the following would be ineffective? All the choices would have the desired effect Decreasing the overtime wage premium Reducing the length of the standard work week beyond which an overtime premium must be paid Reducing the absolute maximum number of hours that any worker can work Granting workers the right to refuse overtime
Reducing the absolute maximum number of hours that any worker can work
Which of the following statements regarding wage costs is true? They area deferred compensation. They are a one-time labour cost. They are a fixed labour cost. They are a quasi-fixed labour cost. They are a variable labour cost.
They are a variable labour cost.
The practice of worksharing refers to: sharing the scarce number of work hours and jobs that are available by reducing the number of jobs. sharing the scarce number of jobs that are available by reducing the length of the standard work week. sharing the scarce number of jobs that are available by banning overtime. sharing the scarce number of jobs that are available by hiring new workers. sharing the scarce number of employees that are available.
sharing the scarce number of jobs that are available by reducing the length of the standard work week.
Which of the following statements is true in regarding to the marginal cost of labour? is derived from the marginal revenue product curve. is equal to the wage paid if the firm is a monopsonist. is the same as the supply curve of labour for a monopsonist. shows the increase in revenue received by the firm if it hires one more worker. is horizontal for a perfectly competitive firm but is downward sloping for a monopsonist.
shows the increase in revenue received by the firm if it hires one more worker.
For a firm that is a competitor in the output market, the demand for labour does not depend on: the price of capital. the market demand for the final product. the price of the output. the marginal product of labour. the structure of the labour market.
the market demand for the final product.
Within the framework of competitive labour markets, what is the expected effect of the minimum wage? to make the workers who are retained less productive than what would otherwise be the case to shift the demand for low-skilled workers to the left (a fall) to cause a shortage of workers at the going transactions wage to reduce employment below the level that would otherwise exist to make the workers better off
to reduce employment below the level that would otherwise exist
Which of the following is not a category in pay for time not worked? unemployment insurance workers' compensation overtime pay welfare pensions
welfare
Which of the following statements regarding the presence of non-wage benefits is false? Major components are pension and welfare plans As a percentage of the payroll among large firms, they comprised about 37% in the late 1990s. A major component is pay for hours that are not worked. As a percentage of the payroll among large firms, there has been a downward trend in the presence of non-wage benefits over the past 60 years or so. Pay for time not worked is the fastest growing component of the non-wage benefit since 1960s.
As a percentage of the payroll among large firms, there has been a downward trend in the presence of non-wage benefits over the past 60 years or so.
Consider the model for the derivation of demand for labour in a long-run context. At equilibrium, which of the following statements is false? The slope of the isoquant is equal to the slope of the isocost line. If labour is twice as expensive per unit than capital, then the marginal product of labour is twice as large as the marginal product of capital. If the firm were to alter its input combination by hiring more or less of a factor, its profits would fall. At the optimal level of output, labour is cheaper than capital. A profit-maximizing firm will choose the cheapest capital-labour combination that yields the optimal output.
At the optimal level of output, labour is cheaper than capital.
What is the primary difference between a monopsonist and a firm which operates in a perfectly competitive labour market? In order to recruit another worker, the monopsonist incurs a larger increase in labour costs. In order to recruit another worker, the monopsonist incurs a smaller increase in labour costs. The labour supply curve is irrelevant for the monopsonist. The monopsonist is likely to be more profitable. The monopsonist hires such that the marginal revenue product of labour is equal to the marginal labour cost, but the non-monopsonist does not.
In order to recruit another worker, the monopsonist incurs a larger increase in labour costs.
The essence of human capital theory is that: Workers invested in higher education in order to send a signal to potential employers regarding their underlying ability. Firms spend money on their capital stock and equipment in order for labour to become more productive. Investments are made in human resources so as to improve their productivity and, therefore, their earnings. All workers who want to increase their salary should obtain a university diploma.
Investments are made in human resources so as to improve their productivity and, therefore, their earnings.
Which of the following statements about a payroll tax is true? It is shared equally between workers and employers. It reduces the quantity demanded of workers if the supply of labour is perfectly inelastic. It is borne entirely by workers if the supply of labour is perfectly elastic. It is borne entirely by employers if demand is perfectly inelastic. It generally reduces the quantity demanded of workers.
It generally reduces the quantity demanded of workers.
If an employer is competitive in the labour market: It can pay lower than the market equilibrium wage. It has to pay at least the going wage. It can affect the going market wage by either hiring many workers or laying off many workers. It can pay at most the going wage. The wage level is independent of the structure of the product market.
It has to pay at least the going wage.
Which of the following statements regarding the practice of labour hoarding is false? There is not a lot of empirical evidence that firms adopt this practice. It is most likely to occur with high-skilled workers. It is most likely to occur with low skilled workers. It is most likely to occur when most labour costs are variable. It is most likely to occur in situations where quasi-fixed labour costs are high.
It is most likely to occur when most labour costs are variable.
Which of the following refers to general training? It is the training that can be used only in the firm that provides it. It is the training that can be generalized to a wide range of jobs. It is the training designed for generalists. It is the training that can be used at various firms.
It is the training that can be used at various firms.
The primary reason why workers in the fast-food industry are paid less is that: It is easy to substitute capital for labour in the industry, making the demand for labour wage elastic. The demand for the product that they produce is quite elastic, making the demand for labour wage elastic. These workers are seldom unionized. Labour costs comprise a large share of the employer's expenses, making the demand for labour wage inelastic. These workers collect economic rents.
The demand for the product that they produce is quite elastic, making the demand for labour wage elastic.
The scale effect of a wage change implies that: Firms substitute toward the input that has become relatively cheaper. In order to increase output, a firm will use more labour even if the wage increases. The firm reduces its output in response to the wage increase. Along with the substitution effect, the demand for labour is downward sloping. The demand for labour may be upward sloping if labour is an inferior input.
The firm reduces its output in response to the wage increase.
Which of the following statements regarding monopsony is false? The marginal cost of labour is lower than the average cost of labour in the case of monopsony. The total wage bill is lower in the case of monopsony. The equilibrium wage and the equilibrium employment levels are lower than what they would be if the labour market were perfectly competitive. All workers except the marginal worker are paid more than their reservation wage. If a competitive labour market were to become a monopsony, economic rent would be transferred from the workers directly to the employer.
The marginal cost of labour is lower than the average cost of labour in the case of monopsony.
Along an isocost curve, which of the following remains constant? The quantity of capital The wage elasticity of demand for labour The level of production The market prices of inputs The quantity of labour
The market prices of inputs
Which of the following statements is false? The monopsonist may be able to carry out wage discrimination. The monopsonist is a wage taker. The monopsonist has market power in the labour market. The monopsonist is a profit-maximizing firm. The monopsonist has no demand curve for labour.
The monopsonist is a wage taker.
Which of the following regarding "education as a signalling device" is correct? The role of education in this model is only used as a filter, which has no effect on worker's productivity. Higher educated workers may have higher marginal costs to obtain education. Lower educated workers have lower productivity. Lower educated workers may have lower marginal costs to obtain education. Higher educated workers have higher productivity.
The role of education in this model is only used as a filter, which has no effect on worker's productivity.
In the context of outsourcing, consider the case where domestic labour and foreign labour are almost perfect complements. If there is an increase in the wage paid to domestic labour, then which of the following statements is true? There will be a small substitution effect away from domestic labour, but the scale effect will work toward domestic labour. There will be no substitution effect but only scale effect. There will be a large substitution effect and a smaller scale effect away from domestic labour. There will be a small substitution effect toward domestic labour, but the scale effect will work in favour of domestic labour. There will be a small substitution effect and a larger scale effect away from domestic labour.
There will be a small substitution effect and a larger scale effect away from domestic labour.
Empirical evidence on the practical importance of minimum wage laws suggests: that they do reduce the employment levels of younger and unskilled workers to a major extent - a strong disemployment effect. that they succeed in raising the incomes of poor households. that their impact on the employment level is nil. that they do reduce the employment levels of younger and unskilled workers to a minor extent - a weak disemployment effect. that their impact on employment is actually favourable because they put more money in the hands of poorly paid workers, stimulating consumer spending, thus promoting economic growth.
that they do reduce the employment levels of younger and unskilled workers to a minor extent - a weak disemployment effect.
The rule for optimal human capital investment is that: 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. 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. 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. 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.
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.