Question 1

Which of the following factors will favor paying compensation by time rather than by output?

Accepted Answer

A)  Output is easily measured and monitored. 
B)  The production of output requires the cooperation of many workers across the firm. 
C)  The industry's output is not affected by national economic conditions. 
D)  Workers are risk-seeking rather than risk-adverse. 
A)  Output is easily measured and monitored. 
B)  The production of output requires the cooperation of many workers across the firm. 
C)  The industry's output is not affected by national economic conditions. 
D)  Workers are risk-seeking rather than risk-adverse.

Question 2

Which of the following is NOT an example of an efficiency wage?

Accepted Answer

A)  A firm paying a higher wage has less turnover costs. 
B)  A firm paying a higher wage has less supervision costs. 
C)  A firm paying a higher wage employs more educated workers. 
D)  A firm paying a higher wage gets more effort from its workers. 
A)  A firm paying a higher wage has less turnover costs. 
B)  A firm paying a higher wage has less supervision costs. 
C)  A firm paying a higher wage employs more educated workers. 
D)  A firm paying a higher wage gets more effort from its workers.

Question 3

Which of the following types of pay is NOT linked to output?

Accepted Answer

A)  commissions 
B)  profit sharing 
C)  hourly wages 
D)  piece-rate pay 
A)  commissions 
B)  profit sharing 
C)  hourly wages 
D)  piece-rate pay

Question 4

The manager of Mel's Diner feels that most of his waiters are rude to customers and don't hustle enough. He proposes that all tips should be placed in one pot and divided on the basis of the number of customers served. This plan is likely to ________ hustle and ________ rudeness.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; decrease 
D)  decrease; increase

Question 5

The best way to align the interest of corporate executives and company owners is probably to pay executives

Accepted Answer

A)  based on annual profit. 
B)  a fixed salary. 
C)  based on the stock market value of the company. 
D)  based on sales of the firm. 
A)  based on annual profit. 
B)  a fixed salary. 
C)  based on the stock market value of the company. 
D)  based on sales of the firm.

Question 6

Students in a 100 person class agree before hand to answer all 20 multiple choice questions with B. Under which of these grading methods is this likely to prove an effective agreement that does not produce cheating on the agreement (for example, by a few students answering the questions correctly)?

Accepted Answer

A)  The professor gives the top five papers a 100, the next five best an 80, and the rest a 50. 
B)  The professor gives the highest score a grade of 100 and starts reducing scores by 5 points for every one wrong. 
C)  The professor substracts 5 points from 100 for every question wrong. 
D)  The best paper gets an A, the rest an F. 
A)  The professor gives the top five papers a 100, the next five best an 80, and the rest a 50. 
B)  The professor gives the highest score a grade of 100 and starts reducing scores by 5 points for every one wrong. 
C)  The professor substracts 5 points from 100 for every question wrong. 
D)  The best paper gets an A, the rest an F.

Question 7

A company has a merit pay plan based on the relative performances of workers teams. Each worker is a team gets the same wage as other team members, but those in more productive teams get higher wages. Which of the following would NOT explain why this incentive might be better than other methods for motivating workers to work harder?

Accepted Answer

A)  If a worker works harder, it increases the productivity of other team members. 
B)  If a team works harder, it does not affect the productivity of other teams. 
C)  One worker can easily sabotage the productivity of other workers. 
D)  One team can easily sabotage the productivity of other teams. 
A)  If a worker works harder, it increases the productivity of other team members. 
B)  If a team works harder, it does not affect the productivity of other teams. 
C)  One worker can easily sabotage the productivity of other workers. 
D)  One team can easily sabotage the productivity of other teams.

Question 8

Suppose that monopsony behavior results from the increased monitoring costs at large firms. A higher minimum wage would ________ the marginal expense of hiring labor but only if the workers are ________ afraid of losing their jobs and thus need less supervision.

Accepted Answer

A)  rise; more 
B)  raise; less 
C)  lower; more 
D)  lower; less 
A)  rise; more 
B)  raise; less 
C)  lower; more 
D)  lower; less

Question 9

A self-enforcing contract requires that

Accepted Answer

A)  employees gain from opportunistic behavior. 
B)  one party receives the entire surplus. 
C)  both employees and employers lose by discontinuing their contract. 
D)  the surplus be divided equally. 
A)  employees gain from opportunistic behavior. 
B)  one party receives the entire surplus. 
C)  both employees and employers lose by discontinuing their contract. 
D)  the surplus be divided equally.

Question 10

Golf tournaments are promotion tournaments where the person coming in first gets substantially more than the person coming in second. Which of the following would likely decrease the difference in prize money going to the person coming in first (assuming the tournament sponsors want each player to give their best effort to playing good golf)?

Accepted Answer

A)  Variation in playing conditions increase. 
B)  Players come to dislike the variation in pay more. 
C)  Players playing hard increases the money the tournament can make. 
D)  Golf rules are modified to allow players to hit each other with golf clubs. 
A)  Variation in playing conditions increase. 
B)  Players come to dislike the variation in pay more. 
C)  Players playing hard increases the money the tournament can make. 
D)  Golf rules are modified to allow players to hit each other with golf clubs.

Question 11

The surplus due to specific training of employees is

Accepted Answer

A)  received by the employees. 
B)  received by the employers. 
C)  used to increase employees' wages above their marginal product. 
D)  shared by the employees and the employers. 
A)  received by the employees. 
B)  received by the employers. 
C)  used to increase employees' wages above their marginal product. 
D)  shared by the employees and the employers.

Question 12

A "signal" will not work to sort good from bad workers if

Accepted Answer

A)  the signal is as costly to good and bad workers. 
B)  bad workers are more risk-adverse than good workers. 
C)  the signal is excessively expensive to bad workers. 
D)  good workers are more productive than bad workers. 
A)  the signal is as costly to good and bad workers. 
B)  bad workers are more risk-adverse than good workers. 
C)  the signal is excessively expensive to bad workers. 
D)  good workers are more productive than bad workers.

Question 13

The workers who will prefer piece-rate pay will usually be

Accepted Answer

A)  less present-oriented than average. 
B)  less motivated than average. 
C)  more productive than average. 
D)  more risk-averse than average. 
A)  less present-oriented than average. 
B)  less motivated than average. 
C)  more productive than average. 
D)  more risk-averse than average.

Question 14

Many employees prefer to be paid on the basis of

Accepted Answer

A)  output, because it decreases variation of wages. 
B)  time, because it decreases variation of wages. 
C)  output, because it increases variation of wages. 
D)  time, because it increases variation of wages. 
A)  output, because it decreases variation of wages. 
B)  time, because it decreases variation of wages. 
C)  output, because it increases variation of wages. 
D)  time, because it increases variation of wages.

Question 15

Most employment contracts are

Accepted Answer

A)  legally enforceable. 
B)  implicit. 
C)  formal. 
D)  complete. 
A)  legally enforceable. 
B)  implicit. 
C)  formal. 
D)  complete.

Question 16

Firm X arranges its pay such that workers are underpaid early in their career but overpaid latter such that workers are, if they stay with the firm, on net better off. A necessary condition for this method of underpayments followed by overpayments to work is that

Accepted Answer

A)  less motivated workers are more likely to stay with the firm and thus need more incentives to work hard. 
B)  workers discount the future with a high interest rate. 
C)  this sequencing of pay raises worker productivity. 
D)  supervising workers is cheap and effective. 
A)  less motivated workers are more likely to stay with the firm and thus need more incentives to work hard. 
B)  workers discount the future with a high interest rate. 
C)  this sequencing of pay raises worker productivity. 
D)  supervising workers is cheap and effective.

Question 17

Firm X is observed to pay more on average than other firms to its sales force. Compared to other firms, it pays less salary but more commissions to its salesforce. The turnover in its salesforce is also higher than other firms. Firm X earns the same rate of return as other firms. Which of the following is most consistent with these facts?

Accepted Answer

A)  Firm X must pay more because it is attracting a more risk-adverse sales force. 
B)  The higher pay reflects a greater investment by Firm X in the specific human capital of its salesforce. 
C)  The higher pay compensates the salesforce for putting more effort into selling, which in turn increases the productivity of its salesforce. 
D)  Its higher pay reflects a promotion-type tournament that sorts out those who don't want to work long hours. 
A)  Firm X must pay more because it is attracting a more risk-adverse sales force. 
B)  The higher pay reflects a greater investment by Firm X in the specific human capital of its salesforce. 
C)  The higher pay compensates the salesforce for putting more effort into selling, which in turn increases the productivity of its salesforce. 
D)  Its higher pay reflects a promotion-type tournament that sorts out those who don't want to work long hours.

Question 18

A radically more progressive tax system (which taxes workers earning more at a much higher tax rate) will likely have which of these effects?

Accepted Answer

A)  Cause firms to move towards incentive systems that delay wage payments. 
B)  Encourage workers to seek employers better matched to their skills. 
C)  Cause firms to pay efficiency wages 
D)  Cause firms to pay by salary rather than with piece rates. 
A)  Cause firms to move towards incentive systems that delay wage payments. 
B)  Encourage workers to seek employers better matched to their skills. 
C)  Cause firms to pay efficiency wages 
D)  Cause firms to pay by salary rather than with piece rates.

Question 19

Which of the following can NOT explain why workers' earnings increase with experience?

Accepted Answer

A)  Earnings are a reward for investment in training. 
B)  Workers with lots of experience at a firm tend to be very productive. 
C)  Productivity eventually decreases with age. 
D)  This practice reduces shirking. 
A)  Earnings are a reward for investment in training. 
B)  Workers with lots of experience at a firm tend to be very productive. 
C)  Productivity eventually decreases with age. 
D)  This practice reduces shirking.

Question 20

In a perfectly competitive economy, workers are well-informed and firms can monitor workers. Suppose the government then passes a "Worker Privacy Act" that makes it very expensive to monitor workers. Which of the following is most likely to occur?

Accepted Answer

A)  Employment and wages will fall. 
B)  Employment will fall but the effect on wages is uncertain. 
C)  Employment and wages will rise. 
D)  Wages will rise but the effect on employment is uncertain. 
A)  Employment and wages will fall. 
B)  Employment will fall but the effect on wages is uncertain. 
C)  Employment and wages will rise. 
D)  Wages will rise but the effect on employment is uncertain.

Which of the following factors will favor paying compensation by time rather than by output?

Which of the following is NOT an example of an efficiency wage?

Which of the following types of pay is NOT linked to output?

The manager of Mel's Diner feels that most of his waiters are rude to customers and don't hustle enough. He proposes that all tips should be placed in one pot and divided on the basis of the number of customers served. This plan is likely to hustle and rudeness.

The best way to align the interest of corporate executives and company owners is probably to pay executives

Students in a 100 person class agree before hand to answer all 20 multiple choice questions with B. Under which of these grading methods is this likely to prove an effective agreement that does not produce cheating on the agreement (for example, by a few students answering the questions correctly)?

Suppose that monopsony behavior results from the increased monitoring costs at large firms. A higher minimum wage would the marginal expense of hiring labor but only if the workers are afraid of losing their jobs and thus need less supervision.

A self-enforcing contract requires that

The surplus due to specific training of employees is

A "signal" will not work to sort good from bad workers if

The workers who will prefer piece-rate pay will usually be

Many employees prefer to be paid on the basis of

Most employment contracts are

Firm X arranges its pay such that workers are underpaid early in their career but overpaid latter such that workers are, if they stay with the firm, on net better off. A necessary condition for this method of underpayments followed by overpayments to work is that

A radically more progressive tax system (which taxes workers earning more at a much higher tax rate) will likely have which of these effects?

Which of the following can NOT explain why workers' earnings increase with experience?

In a perfectly competitive economy, workers are well-informed and firms can monitor workers. Suppose the government then passes a "Worker Privacy Act" that makes it very expensive to monitor workers. Which of the following is most likely to occur?

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

Which of the following factors will favor paying compensation by time rather than by output?

Which of the following is NOT an example of an efficiency wage?

Which of the following types of pay is NOT linked to output?

The manager of Mel's Diner feels that most of his waiters are rude to customers and don't hustle enough. He proposes that all tips should be placed in one pot and divided on the basis of the number of customers served. This plan is likely to ________ hustle and ________ rudeness.

The best way to align the interest of corporate executives and company owners is probably to pay executives

Students in a 100 person class agree before hand to answer all 20 multiple choice questions with B. Under which of these grading methods is this likely to prove an effective agreement that does not produce cheating on the agreement (for example, by a few students answering the questions correctly)?

Suppose that monopsony behavior results from the increased monitoring costs at large firms. A higher minimum wage would ________ the marginal expense of hiring labor but only if the workers are ________ afraid of losing their jobs and thus need less supervision.

A self-enforcing contract requires that

The surplus due to specific training of employees is

A "signal" will not work to sort good from bad workers if

The workers who will prefer piece-rate pay will usually be

Many employees prefer to be paid on the basis of

Most employment contracts are

Firm X arranges its pay such that workers are underpaid early in their career but overpaid latter such that workers are, if they stay with the firm, on net better off. A necessary condition for this method of underpayments followed by overpayments to work is that

A radically more progressive tax system (which taxes workers earning more at a much higher tax rate) will likely have which of these effects?

Which of the following can NOT explain why workers' earnings increase with experience?

In a perfectly competitive economy, workers are well-informed and firms can monitor workers. Suppose the government then passes a "Worker Privacy Act" that makes it very expensive to monitor workers. Which of the following is most likely to occur?

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

The manager of Mel's Diner feels that most of his waiters are rude to customers and don't hustle enough. He proposes that all tips should be placed in one pot and divided on the basis of the number of customers served. This plan is likely to hustle and rudeness.

Suppose that monopsony behavior results from the increased monitoring costs at large firms. A higher minimum wage would the marginal expense of hiring labor but only if the workers are afraid of losing their jobs and thus need less supervision.