Question 1

Risk-averse workers

Accepted Answer

A)  have shallow wage-risk indifference curves when risk is graphed on the x-axis. 
B)  are willing to work in riskier environments for a relatively low increase in the wage. 
C)  are willing to accept large wage decreases in exchange for a safer work environment. 
D)  never work in risky environments. 
E)  are more productive than risk-loving workers. 
A)  have shallow wage-risk indifference curves when risk is graphed on the x-axis. 
B)  are willing to work in riskier environments for a relatively low increase in the wage. 
C)  are willing to accept large wage decreases in exchange for a safer work environment. 
D)  never work in risky environments. 
E)  are more productive than risk-loving workers. C

Question 2

Under normal circumstances, the equilibrium compensation wage differential is the wage differential that exactly attracts the

Accepted Answer

A)  average worker into a regular job. 
B)  marginal worker into a risky job. 
C)  average worker into a less risky job. 
D)  marginal worker into the labor market. 
E)  average high-skilled worker into a low-skill job. 
A)  average worker into a regular job. 
B)  marginal worker into a risky job. 
C)  average worker into a less risky job. 
D)  marginal worker into the labor market. 
E)  average high-skilled worker into a low-skill job. B

Question 3

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

Accepted Answer

A)  Workers who originally worked safe jobs are helped by the policy. 
B)  Firms that originally offered safe jobs are hurt by the policy. 
C)  Workers who originally worked risky jobs are helped by the policy. 
D)  Firms that originally offered risky jobs are hurt by the policy. 
E)  No one is hurt by the new policy. 
A)  Workers who originally worked safe jobs are helped by the policy. 
B)  Firms that originally offered safe jobs are hurt by the policy. 
C)  Workers who originally worked risky jobs are helped by the policy. 
D)  Firms that originally offered risky jobs are hurt by the policy. 
E)  No one is hurt by the new policy. D

Question 4

The market-clearing wage differential between a safe and risky job is $5000. Which of the following is not true?

Accepted Answer

A)  The marginal worker is indifferent between working the safe or risky job. 
B)  All but the marginal worker in safe jobs require a wage differential above $5000 to accept a risky job. 
C)  All but the marginal worker in the risky job require a wage differential below $5000 to be indifferent between safe and risky jobs. 
D)  The per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5000. 
E)  The average per worker cost of offering safe jobs exceeds $5000 at the risky firms. 
A)  The marginal worker is indifferent between working the safe or risky job. 
B)  All but the marginal worker in safe jobs require a wage differential above $5000 to accept a risky job. 
C)  All but the marginal worker in the risky job require a wage differential below $5000 to be indifferent between safe and risky jobs. 
D)  The per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5000. 
E)  The average per worker cost of offering safe jobs exceeds $5000 at the risky firms.

Question 5

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?

Accepted Answer

A)  Worker utility will increase. 
B)  Employment will likely 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. 
B)  Employment will likely 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.

Question 6

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

Accepted Answer

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. 
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.

Question 7

The value of life is calculated by comparing

Accepted Answer

A)  wages to risk levels. 
B)  risk levels to the number of children in a worker's household. 
C)  wages to the number of children in a worker's household. 
D)  average life expectancy by occupation to average risk levels by industry. 
E)  average wages to the average retirement age. 
A)  wages to risk levels. 
B)  risk levels to the number of children in a worker's household. 
C)  wages to the number of children in a worker's household. 
D)  average life expectancy by occupation to average risk levels by industry. 
E)  average wages to the average retirement age.

Question 8

Assume that the market-clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

Accepted Answer

A)  Many firms that currently offer risky jobs will begin offering safe jobs. 
B)  The fraction of people working safe jobs will decrease. 
C)  The wage associated with risky jobs will decrease. 
D)  The number of people working risky jobs will increase. 
E)  The wage differential will decrease. 
A)  Many firms that currently offer risky jobs will begin offering safe jobs. 
B)  The fraction of people working safe jobs will decrease. 
C)  The wage associated with risky jobs will decrease. 
D)  The number of people working risky jobs will increase. 
E)  The wage differential will decrease.

Question 9

A hedonic wage function could be applied to which of the following job characteristics?

Accepted Answer

A)  the probability of being injured on the job 
B)  the degree to which a job involves monotonous work 
C)  the degree to which the area surrounding the job location is safe 
D)  the degree to which a job involves strenuous work 
E)  All of the above can be represented with a hedonic wage function. 
A)  the probability of being injured on the job 
B)  the degree to which a job involves monotonous work 
C)  the degree to which the area surrounding the job location is safe 
D)  the degree to which a job involves strenuous work 
E)  All of the above can be represented with a hedonic wage function.

Question 10

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

Accepted Answer

A)  All points on each isoprofit curve yield the same level of profit. 
B)  Profit-maximizing firms are indifferent as to where they operate on any given curve. 
C)  Isoprofit curves going out along the x-axis yield higher profits. 
D)  Isoprofit curves going up along the y-axis yield higher profits. 
E)  Isoprofit lines are upward sloping. 
A)  All points on each isoprofit curve yield the same level of profit. 
B)  Profit-maximizing firms are indifferent as to where they operate on any given curve. 
C)  Isoprofit curves going out along the x-axis yield higher profits. 
D)  Isoprofit curves going up along the y-axis yield higher profits. 
E)  Isoprofit lines are upward sloping.

Question 11

In the standard theory of compensating differentials, a worker's reservation price is the

Accepted Answer

A)  amount of money it takes to entice the worker into accepting a risky job. 
B)  amount of money it costs a worker to take a risky job. 
C)  amount of money a worker loses for not taking any job. 
D)  amount of money it costs a worker to take a safe job. 
E)  difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs. 
A)  amount of money it takes to entice the worker into accepting a risky job. 
B)  amount of money it costs a worker to take a risky job. 
C)  amount of money a worker loses for not taking any job. 
D)  amount of money it costs a worker to take a safe job. 
E)  difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs.

Question 12

When the government imposes safety regulations on a particular job or labor market, what is most likely to happen?

Accepted Answer

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. 
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.

Question 13

If the U.S. system of unemployment insurance did not exist, one would predict that

Accepted Answer

A)  workers would never become unemployed. 
B)  workers who became unemployed would remain unemployed for longer durations. 
C)  no worker would accept a job that is associated with seasonal unemployment. 
D)  seasonal unemployment would cease to exist. 
E)  workers in jobs that face seasonal cycles of unemployment would be paid higher wages. 
A)  workers would never become unemployed. 
B)  workers who became unemployed would remain unemployed for longer durations. 
C)  no worker would accept a job that is associated with seasonal unemployment. 
D)  seasonal unemployment would cease to exist. 
E)  workers in jobs that face seasonal cycles of unemployment would be paid higher wages.

Question 14

A standard hedonic wage function might show what relationship?

Accepted Answer

A)  the relationship between the wage and a worker's age 
B)  the relationship between the wage and a worker's race 
C)  the relationship between the wage and a worker's gender 
D)  the relationship between the wage and the probability of injury faced by the worker 
E)  the relationship between the wage and a worker's skill level 
A)  the relationship between the wage and a worker's age 
B)  the relationship between the wage and a worker's race 
C)  the relationship between the wage and a worker's gender 
D)  the relationship between the wage and the probability of injury faced by the worker 
E)  the relationship between the wage and a worker's skill level

Question 15

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likely to

Accepted Answer

A)  be associated with more fringe benefits. 
B)  be associated with fewer fringe benefits. 
C)  pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states. 
D)  have worse working conditions. 
E)  be seasonal in nature. 
A)  be associated with more fringe benefits. 
B)  be associated with fewer fringe benefits. 
C)  pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states. 
D)  have worse working conditions. 
E)  be seasonal in nature.

Question 16

A potential implication of OSHA regulation is that

Accepted Answer

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

Question 17

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,

Accepted Answer

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. 
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.

Question 18

Ability bias can arise when estimating compensating wage differentials associated with various job characteristics. What is ability bias in this context?

Accepted Answer

A)  Low-skilled workers are likely to have low wages but good job amenities. 
B)  High-skilled workers are likely to have high wages but poor job amenities. 
C)  High-skilled workers are likely to have lower wages than unskilled workers but to have better job amenities. 
D)  High-skilled workers are likely to have higher wages than unskilled workers but to have worse job amenities. 
E)  High-skilled workers are likely to have higher wages than unskilled workers, but they are also likely to trade some of their higher wages for better job amenities. 
A)  Low-skilled workers are likely to have low wages but good job amenities. 
B)  High-skilled workers are likely to have high wages but poor job amenities. 
C)  High-skilled workers are likely to have lower wages than unskilled workers but to have better job amenities. 
D)  High-skilled workers are likely to have higher wages than unskilled workers but to have worse job amenities. 
E)  High-skilled workers are likely to have higher wages than unskilled workers, but they are also likely to trade some of their higher wages for better job amenities.

Question 19

In Probability of Injury (x-axis) versus Wage (y-axis) space, isoprofit curves slope upward because

Accepted Answer

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)  profits are constant with respect to risk. 
E)  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. 
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)  profits are constant with respect to risk. 
E)  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.

Question 20

The supply curve of labor to risky jobs reveals.

Accepted Answer

A)  how many workers are willing to offer their labor to the risky job as a function of the wage differential between the risky job and the safe job. 
B)  how many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the safe job. 
C)  how many workers are willing to offer their labor to the safe job as a function of the wage paid to workers of the risky job. 
D)  the number of workers who dislike risky jobs. 
E)  the fraction of workers who dislike risky jobs. 
A)  how many workers are willing to offer their labor to the risky job as a function of the wage differential between the risky job and the safe job. 
B)  how many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the safe job. 
C)  how many workers are willing to offer their labor to the safe job as a function of the wage paid to workers of the risky job. 
D)  the number of workers who dislike risky jobs. 
E)  the fraction of workers who dislike risky jobs.

Risk-averse workers

Under normal circumstances, the equilibrium compensation wage differential is the wage differential that exactly attracts the

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

The market-clearing wage differential between a safe and risky job is $5000. Which of the following is not true?

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?

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

The value of life is calculated by comparing

Assume that the market-clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

A hedonic wage function could be applied to which of the following job characteristics?

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

In the standard theory of compensating differentials, a worker's reservation price is the

When the government imposes safety regulations on a particular job or labor market, what is most likely to happen?

If the U.S. system of unemployment insurance did not exist, one would predict that

A standard hedonic wage function might show what relationship?

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likely to

A potential implication of OSHA regulation is that

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,

Ability bias can arise when estimating compensating wage differentials associated with various job characteristics. What is ability bias in this context?

In Probability of Injury (x-axis) versus Wage (y-axis) space, isoprofit curves slope upward because

The supply curve of labor to risky jobs reveals.

Introduction to Labor Economics

Labor Supply

Labor Demand

Labor Market Equilibrium

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters

Exam 5: Compensating Wage Differentials

Risk-averse workers

Under normal circumstances, the equilibrium compensation wage differential is the wage differential that exactly attracts the

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

The market-clearing wage differential between a safe and risky job is $5000. Which of the following is not true?

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?

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

The value of life is calculated by comparing

Assume that the market-clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

A hedonic wage function could be applied to which of the following job characteristics?

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

In the standard theory of compensating differentials, a worker's reservation price is the

When the government imposes safety regulations on a particular job or labor market, what is most likely to happen?

If the U.S. system of unemployment insurance did not exist, one would predict that

A standard hedonic wage function might show what relationship?

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likely to

A potential implication of OSHA regulation is that

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,

Ability bias can arise when estimating compensating wage differentials associated with various job characteristics. What is ability bias in this context?

In Probability of Injury (x-axis) versus Wage (y-axis) space, isoprofit curves slope upward because

The supply curve of labor to risky jobs reveals.

Introduction to Labor Economics

Labor Supply

Labor Demand

Labor Market Equilibrium

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters