Question 1

What does the empirical evidence regarding compensating differentials tend to reveal?

Accepted Answer

A)  They do exist in situations of job safety and work hazards. 
B)  There is evidence of the existence of both positive and negative differentials for a wide range of job amenities and disamenities. 
C)  It is hard to find the evidence to support the theory of compensating differentials. 
D)  They do not exist. 
E)  There is evidence that they exist, but the methodology is so fraught with pitfalls that the evidence is not deemed to be credible. 
A)  They do exist in situations of job safety and work hazards. 
B)  There is evidence of the existence of both positive and negative differentials for a wide range of job amenities and disamenities. 
C)  It is hard to find the evidence to support the theory of compensating differentials. 
D)  They do not exist. 
E)  There is evidence that they exist, but the methodology is so fraught with pitfalls that the evidence is not deemed to be credible. A

Question 2

The more ________ the individual, the more he/she requires a _______compensating wage differential in return for accepting a riskier work environment.

Accepted Answer

A)  risk-averse; larger 
B)  risk-neutral; smaller 
C)  risk-averse; smaller 
D)  risk-loving; larger 
E)  risk-neutral; larger 
A)  risk-averse; larger 
B)  risk-neutral; smaller 
C)  risk-averse; smaller 
D)  risk-loving; larger 
E)  risk-neutral; larger A

Question 3

Which of the following is NOT a problem related to the empirical studies of compensating wage differentials?

Accepted Answer

A)  Simultaneous equation bias 
B)  Sample selection bias 
C)  Omitted variables bias 
D)  Specification bias 
E)  Errors-in-variables problems 
A)  Simultaneous equation bias 
B)  Sample selection bias 
C)  Omitted variables bias 
D)  Specification bias 
E)  Errors-in-variables problems D

Question 4

Compensating premiums for job-related risks are normally paid (ceteris paribus) in the form of:

Accepted Answer

A)  longer coffee breaks at Tim Hortons. 
B)  higher degrees of job security. 
C)  higher wages. 
D)  time off the job with pay. 
E)  certificates of appreciation for working at a tough job. 
A)  longer coffee breaks at Tim Hortons. 
B)  higher degrees of job security. 
C)  higher wages. 
D)  time off the job with pay. 
E)  certificates of appreciation for working at a tough job.

Question 5

Which of the following is correct?

Accepted Answer

A)  In a competitive market, the firm will bear the costs of a legislated increase in safety regulations. 
B)  In a competitive market, imposing safety regulation is easy since all firms will adopt it right away due to the market competition. 
C)  In a competitive market, a legislated increase in safety will drive some firms out of the business. 
D)  In a competitive market, the application of uniform safety standard will not help weed out the firms that have low safety technologies. 
E)  In a competitive market, a legislated increase in safety will make people better off. 
A)  In a competitive market, the firm will bear the costs of a legislated increase in safety regulations. 
B)  In a competitive market, imposing safety regulation is easy since all firms will adopt it right away due to the market competition. 
C)  In a competitive market, a legislated increase in safety will drive some firms out of the business. 
D)  In a competitive market, the application of uniform safety standard will not help weed out the firms that have low safety technologies. 
E)  In a competitive market, a legislated increase in safety will make people better off.

Question 6

The employers' offer curve shows which of the following?

Accepted Answer

A)  the wage levels offered by employers that are dependent on the required levels of safety and health 
B)  the maximum compensating wages that will be offered in the labour market for various levels of safety 
C)  the employers' profit-maximizating wages that combines wage and safety levels 
D)  the minimum compensating wages that will be offered in the labour market for various levels of safety 
E)  the employers' preferred combination of wage and safety levels 
A)  the wage levels offered by employers that are dependent on the required levels of safety and health 
B)  the maximum compensating wages that will be offered in the labour market for various levels of safety 
C)  the employers' profit-maximizating wages that combines wage and safety levels 
D)  the minimum compensating wages that will be offered in the labour market for various levels of safety 
E)  the employers' preferred combination of wage and safety levels

Question 7

An isoprofit schedule is defined as:

Accepted Answer

A)  The various combinations of wages and safety that the firm can provide and maintain the same level of utility for the labour force. 
B)  The various combinations of wages and safety that the firm can provide and maintain the same level of profits. 
C)  The various combinations of safety initiatives and wages that the firm can provide and still earn profit. 
D)  The various combinations of wages and safety that the firm can provide and maintain the same level of costs. 
E)  The variation between profit and loss margins that a firm earns as a function of changing wage and job safety levels. 
A)  The various combinations of wages and safety that the firm can provide and maintain the same level of utility for the labour force. 
B)  The various combinations of wages and safety that the firm can provide and maintain the same level of profits. 
C)  The various combinations of safety initiatives and wages that the firm can provide and still earn profit. 
D)  The various combinations of wages and safety that the firm can provide and maintain the same level of costs. 
E)  The variation between profit and loss margins that a firm earns as a function of changing wage and job safety levels.

Question 8

With reference to behavioural economics, in the context of compensating differentials, all of the following statements apply except that:

Accepted Answer

A)  It is based on laboratory experiments in which the choices of workers are observed. 
B)  The labour market will generate compensating differentials in order to deal with job-related amenities and disamenities. 
C)  It gives reasons for why people ignore major infrequent risks or possible disamenties of the job. 
D)  It investigates how individuals make job-related choices (such as working conditions) based on imperfect information. 
E)  It makes a case for government intervention and regulation in the workplace. 
A)  It is based on laboratory experiments in which the choices of workers are observed. 
B)  The labour market will generate compensating differentials in order to deal with job-related amenities and disamenities. 
C)  It gives reasons for why people ignore major infrequent risks or possible disamenties of the job. 
D)  It investigates how individuals make job-related choices (such as working conditions) based on imperfect information. 
E)  It makes a case for government intervention and regulation in the workplace.

Question 9

Consider the diagram for a labour market in which the relevant job attribute is job safety. Why are the isoprofit curves concave, i.e., bowed in towards the origin?

Accepted Answer

A)  Because paying higher wages and providing a safer environment for the workers are both costly for the employer 
B)  Because the marginal rate of transformation between wages and safety is increasing as a firm introduces more sophisticated safety procedure. 
C)  Because a firm's profit decreases if it provides a safer environment for the workers. 
D)  Because there is a negative trade-off between job safety and wages 
E)  Because the marginal rate of transformation between wages and safety is decreasing as a firm introduces more sophisticated safety procedure. 
A)  Because paying higher wages and providing a safer environment for the workers are both costly for the employer 
B)  Because the marginal rate of transformation between wages and safety is increasing as a firm introduces more sophisticated safety procedure. 
C)  Because a firm's profit decreases if it provides a safer environment for the workers. 
D)  Because there is a negative trade-off between job safety and wages 
E)  Because the marginal rate of transformation between wages and safety is decreasing as a firm introduces more sophisticated safety procedure.

Question 10

Consider the diagram for a labour market in which the relevant job attribute is the instability of the hours. In other words, less stable jobs are characterized by irregular hours, with no guarantee of a full time job, but with the possibility of overtime hours some weeks. What would the curves look like?

Accepted Answer

A)  The model cannot be used for this situation 
B)  Positively sloped isoprofit curves and negatively sloped isoutility curves 
C)  Negatively sloped isoprofit curves and positively sloped isoutility curves 
D)  Negatively sloped isoprofit and isoutility curves 
E)  Positively sloped isoprofit and isoutility curves 
A)  The model cannot be used for this situation 
B)  Positively sloped isoprofit curves and negatively sloped isoutility curves 
C)  Negatively sloped isoprofit curves and positively sloped isoutility curves 
D)  Negatively sloped isoprofit and isoutility curves 
E)  Positively sloped isoprofit and isoutility curves

Question 11

The slope of the wage-safety locus gives:

Accepted Answer

A)  The change in the wage premium that the labour market yields for differences in the degree of risk of the job. 
B)  The change in profitability that is associated with different combinations of wages and job safety. 
C)  The change in the wage premium that the labour market yields for differences in the preference of the workers. 
D)  The change in the wage premium that the labour market yields for differences in the salary of each worker. 
E)  The change in the wage premium that the market yields for differences in the safety standards of firms. 
A)  The change in the wage premium that the labour market yields for differences in the degree of risk of the job. 
B)  The change in profitability that is associated with different combinations of wages and job safety. 
C)  The change in the wage premium that the labour market yields for differences in the preference of the workers. 
D)  The change in the wage premium that the labour market yields for differences in the salary of each worker. 
E)  The change in the wage premium that the market yields for differences in the safety standards of firms.

Question 12

Which of the following is not a way in which high wages may induce higher productivity?

Accepted Answer

A)  Through reductions in absenteeism 
B)  Through improved morale 
C)  Through higher levels of job safety and improved working conditions 
D)  Through lower levels of turn over 
E)  Through greater intensity of work effort 
A)  Through reductions in absenteeism 
B)  Through improved morale 
C)  Through higher levels of job safety and improved working conditions 
D)  Through lower levels of turn over 
E)  Through greater intensity of work effort

Question 13

Which of the following statements does not pertain to wage structures?

Accepted Answer

A)  The wage premiums that compensate workers for working jobs with undesirable characteristics 
B)  The lowest wage levels at which workers will accept jobs having certain attributes 
C)  The relative prices of labour that are utilized in order to allocate labour to its most efficient use 
D)  The relative prices of labour that are used to remunerate human capital 
E)  None of the answer choices are correct. 
A)  The wage premiums that compensate workers for working jobs with undesirable characteristics 
B)  The lowest wage levels at which workers will accept jobs having certain attributes 
C)  The relative prices of labour that are utilized in order to allocate labour to its most efficient use 
D)  The relative prices of labour that are used to remunerate human capital 
E)  None of the answer choices are correct.

Question 14

Regarding empirical research on compensating wage differential, which of the following is NOT correct?

Accepted Answer

A)  Compensating wage premiums are larger in nonunion than in union environments. 
B)  Empirical evidences support that individuals would have to be compensated for bearing the risk of unemployment. 
C)  Empirical evidence shows that overall compensation inequality increased even more than wage inequality. 
D)  Compensating wage premiums are paid for work hazards and they increase with the seriousness of the risk. 
E)  People in poorer countries are willing (more realistically, constrained) to take on more risk in return for smaller wage increases than are people in richer countries. 
A)  Compensating wage premiums are larger in nonunion than in union environments. 
B)  Empirical evidences support that individuals would have to be compensated for bearing the risk of unemployment. 
C)  Empirical evidence shows that overall compensation inequality increased even more than wage inequality. 
D)  Compensating wage premiums are paid for work hazards and they increase with the seriousness of the risk. 
E)  People in poorer countries are willing (more realistically, constrained) to take on more risk in return for smaller wage increases than are people in richer countries.

Question 15

Which of the classical economists was the first to analyze the topic of compensating wage differentials?

Accepted Answer

A)  John Stuart Mill 
B)  John Maynard Keynes 
C)  Adam Smith 
D)  David Ricardo 
E)  Alfred Marshall 
A)  John Stuart Mill 
B)  John Maynard Keynes 
C)  Adam Smith 
D)  David Ricardo 
E)  Alfred Marshall

Question 16

The isoprofit schedule exhibits a(n) _______between wages and job safety levels.

Accepted Answer

A)  increasing marginal rate of substitution 
B)  constant tradeoff 
C)  diminishing marginal rate of substitution 
D)  diminishing marginal rate of transformation 
E)  increasing marginal rate of transformation 
A)  increasing marginal rate of substitution 
B)  constant tradeoff 
C)  diminishing marginal rate of substitution 
D)  diminishing marginal rate of transformation 
E)  increasing marginal rate of transformation

Question 17

The curvature of the isoutility curve illustrates:

Accepted Answer

A)  a diminishing marginal rate of substitution between wages and job safety. 
B)  the law of diminishing marginal returns applied to wages. 
C)  the diminishing marginal rate of technical substitution between wages and job safety. 
D)  a diminishing marginal rate of transformation between wages and job safety. 
E)  the amount of safety that can be exchanged for wages on the labour market. 
A)  a diminishing marginal rate of substitution between wages and job safety. 
B)  the law of diminishing marginal returns applied to wages. 
C)  the diminishing marginal rate of technical substitution between wages and job safety. 
D)  a diminishing marginal rate of transformation between wages and job safety. 
E)  the amount of safety that can be exchanged for wages on the labour market.

Question 18

In the context of job related risk, the term "value of life" refers to:

Accepted Answer

A)  people's willingness to pay in order to reduce the risk of death from a job-related accident to zero. 
B)  the value that is placed on the possibility of death in a working environment. 
C)  the average amount of awards in law suits involving wrongful death. 
D)  people's willingness to pay to save a person's life. 
E)  more leisure time. 
A)  people's willingness to pay in order to reduce the risk of death from a job-related accident to zero. 
B)  the value that is placed on the possibility of death in a working environment. 
C)  the average amount of awards in law suits involving wrongful death. 
D)  people's willingness to pay to save a person's life. 
E)  more leisure time.

Question 19

Which of the following regarding family-friendly workplace practice is correct?

Accepted Answer

A)  Practices as the availability of parental leave, flexible working hours, job sharing, and taking time off work and making it up later are all part of the family-friendly workplace programs advocated by the government. 
B)  One cannot use the theory of compensating wage differentials to explain family-friendly workplace practice since it is not a job characteristic. 
C)  Empirical research finds little evidences to support the use of the theory of compensating wage differentials to explain family-friendly workplace practice. 
D)  One cannot use the theory of compensating wage differentials to explain family-friendly workplace practice since people are not willing to accept lower wages in return to family-friendly work environment. 
E)  None of the answer choices are correct. 
A)  Practices as the availability of parental leave, flexible working hours, job sharing, and taking time off work and making it up later are all part of the family-friendly workplace programs advocated by the government. 
B)  One cannot use the theory of compensating wage differentials to explain family-friendly workplace practice since it is not a job characteristic. 
C)  Empirical research finds little evidences to support the use of the theory of compensating wage differentials to explain family-friendly workplace practice. 
D)  One cannot use the theory of compensating wage differentials to explain family-friendly workplace practice since people are not willing to accept lower wages in return to family-friendly work environment. 
E)  None of the answer choices are correct.

Question 20

How do economists go about estimating the value of life in the context of job safety regulation?

Accepted Answer

A)  They add up the cost of implementing all of the job safety features in firms that have excellent job safety records. 
B)  They estimate the compensating wage differential that workers in a dangerous occupation receive for the level of risk that they assume, and then extrapolate that figure for a scenario in which the risk is reduced to zero. 
C)  They take the amounts that are rewarded to victims' families in wrongful death law suits. 
D)  They estimate the difference between profits that are earned by firms with dangerous working conditions versus those with safer working conditions. 
E)  They never engage in such an exercise, as life is infinitely precious and thus no value can be placed upon it. 
A)  They add up the cost of implementing all of the job safety features in firms that have excellent job safety records. 
B)  They estimate the compensating wage differential that workers in a dangerous occupation receive for the level of risk that they assume, and then extrapolate that figure for a scenario in which the risk is reduced to zero. 
C)  They take the amounts that are rewarded to victims' families in wrongful death law suits. 
D)  They estimate the difference between profits that are earned by firms with dangerous working conditions versus those with safer working conditions. 
E)  They never engage in such an exercise, as life is infinitely precious and thus no value can be placed upon it.

What does the empirical evidence regarding compensating differentials tend to reveal?

The more __ the individual, the more he/she requires a _compensating wage differential in return for accepting a riskier work environment.

Which of the following is NOT a problem related to the empirical studies of compensating wage differentials?

Compensating premiums for job-related risks are normally paid (ceteris paribus) in the form of:

Which of the following is correct?

The employers' offer curve shows which of the following?

An isoprofit schedule is defined as:

With reference to behavioural economics, in the context of compensating differentials, all of the following statements apply except that:

Consider the diagram for a labour market in which the relevant job attribute is job safety. Why are the isoprofit curves concave, i.e., bowed in towards the origin?

The slope of the wage-safety locus gives:

Which of the following is not a way in which high wages may induce higher productivity?

Which of the following statements does not pertain to wage structures?

Regarding empirical research on compensating wage differential, which of the following is NOT correct?

Which of the classical economists was the first to analyze the topic of compensating wage differentials?

The isoprofit schedule exhibits a(n) _______between wages and job safety levels.

The curvature of the isoutility curve illustrates:

In the context of job related risk, the term "value of life" refers to:

Which of the following regarding family-friendly workplace practice is correct?

How do economists go about estimating the value of life in the context of job safety regulation?

Labour Supply: Individual Attachment to the Labour Market

Labour Supply and Public Policy: Work Incentive Effects of Alternative Income Maintenance Schemes

Labour Supply Over the Life Cycle

Demand for Labour in Competitive Labour Markets

Labour Demand, Non-Wage Benefits, and Quasi-Fixed Costs

Wages and Employment in a Single Labour Market

Human Capital Theory: Applications to Education and Training

Wage Structures Across Markets

The Economics of Immigration

Discrimination and Male-Female Earnings Differentials

Optimal Compensation Systems, Deferred Compensation, and Mandatory Retirement

Unions and Collective Bargaining

Union Impact on Wage and Non-Wage Outcomes

Unemployment: Meaning, Measurement, and Canadas Experience

Unemployment: Causes and Consequences

Filters

Exam 8: Compensating Wage Differentials

What does the empirical evidence regarding compensating differentials tend to reveal?

The more ________ the individual, the more he/she requires a _______compensating wage differential in return for accepting a riskier work environment.

Which of the following is NOT a problem related to the empirical studies of compensating wage differentials?

Compensating premiums for job-related risks are normally paid (ceteris paribus) in the form of:

Which of the following is correct?

The employers' offer curve shows which of the following?

An isoprofit schedule is defined as:

With reference to behavioural economics, in the context of compensating differentials, all of the following statements apply except that:

Consider the diagram for a labour market in which the relevant job attribute is job safety. Why are the isoprofit curves concave, i.e., bowed in towards the origin?

The slope of the wage-safety locus gives:

Which of the following is not a way in which high wages may induce higher productivity?

Which of the following statements does not pertain to wage structures?

Regarding empirical research on compensating wage differential, which of the following is NOT correct?

Which of the classical economists was the first to analyze the topic of compensating wage differentials?

The isoprofit schedule exhibits a(n) _______between wages and job safety levels.

The curvature of the isoutility curve illustrates:

In the context of job related risk, the term "value of life" refers to:

Which of the following regarding family-friendly workplace practice is correct?

How do economists go about estimating the value of life in the context of job safety regulation?

Labour Supply: Individual Attachment to the Labour Market

Labour Supply and Public Policy: Work Incentive Effects of Alternative Income Maintenance Schemes

Labour Supply Over the Life Cycle

Demand for Labour in Competitive Labour Markets

Labour Demand, Non-Wage Benefits, and Quasi-Fixed Costs

Wages and Employment in a Single Labour Market

Human Capital Theory: Applications to Education and Training

Wage Structures Across Markets

The Economics of Immigration

Discrimination and Male-Female Earnings Differentials

Optimal Compensation Systems, Deferred Compensation, and Mandatory Retirement

Unions and Collective Bargaining

Union Impact on Wage and Non-Wage Outcomes

Unemployment: Meaning, Measurement, and Canadas Experience

Unemployment: Causes and Consequences

Filters

The more __ the individual, the more he/she requires a _compensating wage differential in return for accepting a riskier work environment.