Question 1

One problem with pay for performance is that

Accepted Answer

A)  it provides incentives for workers to put forth effort. 
B)  workers are risk-averse. 
C)  supervision is very expensive. 
D)  workers are income maximizers. 
A)  it provides incentives for workers to put forth effort. 
B)  workers are risk-averse. 
C)  supervision is very expensive. 
D)  workers are income maximizers. B

Question 2

Which of the following assumptions are we making for the first time in this chapter?

Accepted Answer

A)  Workers maximize utility. 
B)  Employers maximize profits. 
C)  The marginal product of labor of two workers may be different. 
D)  The productivity of two workers may differ in ways that are hard to measure. 
A)  Workers maximize utility. 
B)  Employers maximize profits. 
C)  The marginal product of labor of two workers may be different. 
D)  The productivity of two workers may differ in ways that are hard to measure. D

Question 3

If the firm pays the following wages, the marginal revenue product (MRP) of workers goes up as shown. What is the optimal efficient wage for the firm (assume it can only pay discrete dollar amounts)?

Accepted Answer

A)  $7 
B)  $8 
C)  $9 
D)  $10 
A)  $7 
B)  $8 
C)  $9 
D)  $10 D

Question 4

Opportunistic behavior is a tendency on the part of employees to

Accepted Answer

A)  end up working less diligently than their stated intentions implied. 
B)  take the initiative to help advance the employer's objectives. 
C)  plan to mislead employers to attain a "cushy" job. 
D)  maximize income. 
A)  end up working less diligently than their stated intentions implied. 
B)  take the initiative to help advance the employer's objectives. 
C)  plan to mislead employers to attain a "cushy" job. 
D)  maximize income.

Question 5

In a competitive labor market, Firm X pays a higher wage than other firms. The only reason it pays a higher wage is to attract a larger labor pool and get the better workers. Which of the following would we expect to observe about Firm X (as compared to the other firms in the industry)?

Accepted Answer

A)  Firm X makes about the same rate of profit (as other firms). 
B)  Firm X will have a higher quit rate. 
C)  Firm X will set up its retirement package so workers retire early. 
D)  Firm X's wage will continually rise with seniority. 
A)  Firm X makes about the same rate of profit (as other firms). 
B)  Firm X will have a higher quit rate. 
C)  Firm X will set up its retirement package so workers retire early. 
D)  Firm X's wage will continually rise with seniority.

Question 6

Merit-pay plans which rate workers relative to their peers

Accepted Answer

A)  are very popular among nonmanagerial employees. 
B)  generally cause workers to cooperate better. 
C)  can account for factors in the external environment that affect an individual's output. 
D)  work best when there is a bunching of ratings. 
A)  are very popular among nonmanagerial employees. 
B)  generally cause workers to cooperate better. 
C)  can account for factors in the external environment that affect an individual's output. 
D)  work best when there is a bunching of ratings.

Question 7

Which of the following makes a promotion tournament (where the winner gets a large prize, such as a promotion) an effective for motivating workers?

Accepted Answer

A)  Contestants must cooperate with each other to make the firm productive. 
B)  The person who wins gets a prize equal to how much better they are than others. 
C)  It is uncertain as to who will win. 
D)  There are many persons competing for the prize. 
A)  Contestants must cooperate with each other to make the firm productive. 
B)  The person who wins gets a prize equal to how much better they are than others. 
C)  It is uncertain as to who will win. 
D)  There are many persons competing for the prize.

Question 8

Fairness in regards to a worker's reference group is important in the labor market because

Accepted Answer

A)  workers think it is unfair for employers to earn a profit. 
B)  workers care about their relative treatment. 
C)  employers must supervise most workers closely. 
D)  employers want to maximize profits. 
A)  workers think it is unfair for employers to earn a profit. 
B)  workers care about their relative treatment. 
C)  employers must supervise most workers closely. 
D)  employers want to maximize profits.

Question 9

Assume the following is true: in the past, many firms promised their workers a certain type of pension plan in exchange for lower wages. Recently, these firms reneged on their promise by changing to another pension plan that was significantly less valuable to older workers (but was more valuable to younger workers). Assuming the original promised plan was expected to be profitable, why would firms change their plans?

Accepted Answer

A)  Firms had to report the costs of these plans to stockholders. 
B)  Firms wanted to motivate older workers to work harder. 
C)  Due to technical change, the skills of older workers became less valuable. 
D)  Firms placed a higher value on having a good reputation. 
A)  Firms had to report the costs of these plans to stockholders. 
B)  Firms wanted to motivate older workers to work harder. 
C)  Due to technical change, the skills of older workers became less valuable. 
D)  Firms placed a higher value on having a good reputation.

Question 10

Workers who are paid on a piece-rate basis tend to

Accepted Answer

A)  work quickly. 
B)  have a high regard for quality. 
C)  require close supervision. 
D)  work well as members of a team. 
A)  work quickly. 
B)  have a high regard for quality. 
C)  require close supervision. 
D)  work well as members of a team.

Question 11

Efficiency wages are

Accepted Answer

A)  designed to increase profits through reduced turnover and increased morale. 
B)  thought to decrease unemployment. 
C)  not profit-maximizing for employers because they are paying more than the market wage. 
D)  the lowest wages at which a firm can hire workers. 
A)  designed to increase profits through reduced turnover and increased morale. 
B)  thought to decrease unemployment. 
C)  not profit-maximizing for employers because they are paying more than the market wage. 
D)  the lowest wages at which a firm can hire workers.

Question 12

Which of the following would NOT (even if true) explain why wages rise with job tenure?

Accepted Answer

A)  Workers become more productive the longer they are with the firm. 
B)  Over time, the firm is able to dismiss less productive workers. 
C)  Workers acquire more specific human capital the longer they are with the firm. 
D)  Starting with a lower wage and then letting wages rise with job tenure reduces the present value of wages paid to a worker by an employer. 
A)  Workers become more productive the longer they are with the firm. 
B)  Over time, the firm is able to dismiss less productive workers. 
C)  Workers acquire more specific human capital the longer they are with the firm. 
D)  Starting with a lower wage and then letting wages rise with job tenure reduces the present value of wages paid to a worker by an employer.

Question 13

The use of tournament method of pay (paying winners much more than others) is commonly used in golf tournaments. Which of the following would NOT explain this result?

Accepted Answer

A)  Trying harder to win has little effect on the chance of winning. 
B)  It is prohibited for one golfer to change the lie of another golfer's golf ball. 
C)  Fans are willing to pay more to see pros play at the best. 
D)  Playing conditions are usually similar for most players. 
A)  Trying harder to win has little effect on the chance of winning. 
B)  It is prohibited for one golfer to change the lie of another golfer's golf ball. 
C)  Fans are willing to pay more to see pros play at the best. 
D)  Playing conditions are usually similar for most players.

Question 14

Which of the following would NOT be a "signal" to an employer that a potential employee has a low discount rate?

Accepted Answer

A)  The employee's possession of a college or graduate degree. 
B)  The employee's willingness to accept a low-paying job with a good pension plan. 
C)  The employee's desire for a relatively high salary and little chance of advancement. 
D)  The employee's willingness to attain large amounts of training. 
A)  The employee's possession of a college or graduate degree. 
B)  The employee's willingness to accept a low-paying job with a good pension plan. 
C)  The employee's desire for a relatively high salary and little chance of advancement. 
D)  The employee's willingness to attain large amounts of training.

Question 15

A firm penalizes workers who take excessive sick days. As a result, sick workers come to work, make other workers sick, and reduce the firm's productivity. This is an example of

Accepted Answer

A)  moral hazard. 
B)  efficiency wage. 
C)  pay based upon measured aspects of work. 
D)  signaling. 
A)  moral hazard. 
B)  efficiency wage. 
C)  pay based upon measured aspects of work. 
D)  signaling.

Question 16

In the rat race model, workers competing for a promotion work more hours to signal that they are willing to work long hours. What is unusual is that even those who like to work long hours end up working even longer hours. Why is this?

Accepted Answer

A)  They are more risk-adverse. 
B)  They need to outdo workers who don't like long hours but are willing to work temporarily long hours to get the promotion. 
C)  Their excess work is an example of moral hazard. 
D)  They find that excessive work hours are enjoyable and healthy. 
A)  They are more risk-adverse. 
B)  They need to outdo workers who don't like long hours but are willing to work temporarily long hours to get the promotion. 
C)  Their excess work is an example of moral hazard. 
D)  They find that excessive work hours are enjoyable and healthy.

Question 17

Pay for performance works LEAST well for an employee

Accepted Answer

A)  who works as a counselor for other employees in a company. 
B)  who is closely supervised. 
C)  who maximizes utility. 
D)  whose value added is easily measured. 
A)  who works as a counselor for other employees in a company. 
B)  who is closely supervised. 
C)  who maximizes utility. 
D)  whose value added is easily measured.

Question 18

In a promotion tournament model, the salary of the winner will be higher when

Accepted Answer

A)  the cost of the extra effort of the losers is lower. 
B)  there are many qualified participants. 
C)  it is easy for participants to sabotage the efforts of others. 
D)  participants are more diverse in their ability and effort levels. 
A)  the cost of the extra effort of the losers is lower. 
B)  there are many qualified participants. 
C)  it is easy for participants to sabotage the efforts of others. 
D)  participants are more diverse in their ability and effort levels.

Question 19

Higher wages generally

Accepted Answer

A)  decrease worker productivity due to the fact that workers have backward-bending labor supply curves. 
B)  decrease worker productivity due to shirking. 
C)  increase worker productivity due to moral hazard. 
D)  increase worker productivity by increasing the quality of the applicant pool. 
A)  decrease worker productivity due to the fact that workers have backward-bending labor supply curves. 
B)  decrease worker productivity due to shirking. 
C)  increase worker productivity due to moral hazard. 
D)  increase worker productivity by increasing the quality of the applicant pool.

Question 20

A promotion tournament is

Accepted Answer

A)  a process to assure the most productive worker is paid his or her marginal product. 
B)  a process to help a corporation get rid of "deadwood." 
C)  a way to insure that all diligent workers get big rewards. 
D)  a process to motivate several workers to try and win one high-paying job. 
A)  a process to assure the most productive worker is paid his or her marginal product. 
B)  a process to help a corporation get rid of "deadwood." 
C)  a way to insure that all diligent workers get big rewards. 
D)  a process to motivate several workers to try and win one high-paying job.

One problem with pay for performance is that

Which of the following assumptions are we making for the first time in this chapter?

If the firm pays the following wages, the marginal revenue product (MRP) of workers goes up as shown. What is the optimal efficient wage for the firm (assume it can only pay discrete dollar amounts)?

Opportunistic behavior is a tendency on the part of employees to

In a competitive labor market, Firm X pays a higher wage than other firms. The only reason it pays a higher wage is to attract a larger labor pool and get the better workers. Which of the following would we expect to observe about Firm X (as compared to the other firms in the industry)?

Merit-pay plans which rate workers relative to their peers

Which of the following makes a promotion tournament (where the winner gets a large prize, such as a promotion) an effective for motivating workers?

Fairness in regards to a worker's reference group is important in the labor market because

Workers who are paid on a piece-rate basis tend to

Efficiency wages are

Which of the following would NOT (even if true) explain why wages rise with job tenure?

The use of tournament method of pay (paying winners much more than others) is commonly used in golf tournaments. Which of the following would NOT explain this result?

Which of the following would NOT be a "signal" to an employer that a potential employee has a low discount rate?

A firm penalizes workers who take excessive sick days. As a result, sick workers come to work, make other workers sick, and reduce the firm's productivity. This is an example of

In the rat race model, workers competing for a promotion work more hours to signal that they are willing to work long hours. What is unusual is that even those who like to work long hours end up working even longer hours. Why is this?

Pay for performance works LEAST well for an employee

In a promotion tournament model, the salary of the winner will be higher when

Higher wages generally

A promotion tournament is

Introduction

Overview of the Labor Market

The Demand for Labor

Labor Demand Elasticities

Frictions in the Labor Market

Supply of Labor to the Economy: the Decision to Work

Labor Supply: Household Production, the Family, and the Life Cycle

Compensating Wage Differentials and Labor Markets

Investments in Human Capital: Education and Training

Worker Mobility: Migration, Immigration, and Turnover

Gender, Race, and Ethnicity in the Labor Market

Unions and the Labor Market

Unemployment

Inequality in Earnings

The Labor Market Effects of International Trade and Production Sharing

Filters

Exam 11: Pay and Productivity: Wage Determination Within the Firm

One problem with pay for performance is that

Which of the following assumptions are we making for the first time in this chapter?

If the firm pays the following wages, the marginal revenue product (MRP) of workers goes up as shown. What is the optimal efficient wage for the firm (assume it can only pay discrete dollar amounts)?

Opportunistic behavior is a tendency on the part of employees to

In a competitive labor market, Firm X pays a higher wage than other firms. The only reason it pays a higher wage is to attract a larger labor pool and get the better workers. Which of the following would we expect to observe about Firm X (as compared to the other firms in the industry)?

Merit-pay plans which rate workers relative to their peers

Which of the following makes a promotion tournament (where the winner gets a large prize, such as a promotion) an effective for motivating workers?

Fairness in regards to a worker's reference group is important in the labor market because

Workers who are paid on a piece-rate basis tend to

Efficiency wages are

Which of the following would NOT (even if true) explain why wages rise with job tenure?

The use of tournament method of pay (paying winners much more than others) is commonly used in golf tournaments. Which of the following would NOT explain this result?

Which of the following would NOT be a "signal" to an employer that a potential employee has a low discount rate?

A firm penalizes workers who take excessive sick days. As a result, sick workers come to work, make other workers sick, and reduce the firm's productivity. This is an example of

In the rat race model, workers competing for a promotion work more hours to signal that they are willing to work long hours. What is unusual is that even those who like to work long hours end up working even longer hours. Why is this?

Pay for performance works LEAST well for an employee

In a promotion tournament model, the salary of the winner will be higher when

Higher wages generally

A promotion tournament is

Introduction

Overview of the Labor Market

The Demand for Labor

Labor Demand Elasticities

Frictions in the Labor Market

Supply of Labor to the Economy: the Decision to Work

Labor Supply: Household Production, the Family, and the Life Cycle

Compensating Wage Differentials and Labor Markets

Investments in Human Capital: Education and Training

Worker Mobility: Migration, Immigration, and Turnover

Gender, Race, and Ethnicity in the Labor Market

Unions and the Labor Market

Unemployment

Inequality in Earnings

The Labor Market Effects of International Trade and Production Sharing

Filters