Question 1

Which of the following statements is true about investments in general and specific human capital?

Accepted Answer

A) Firms invest in development of general human capital of their employees. 
B) Employees invest in gaining specific human capital. 
C) Investment in general human capital of its employees by a firm may turn into a sunk cost if the employee leaves the organization to join another after completing the relevant training. 
D) When a firm invests in specific human capital of its employees, the employees become more attractive to other firms whose workplaces are operated and staffed differently. 
A) Firms invest in development of general human capital of their employees. 
B) Employees invest in gaining specific human capital. 
C) Investment in general human capital of its employees by a firm may turn into a sunk cost if the employee leaves the organization to join another after completing the relevant training. 
D) When a firm invests in specific human capital of its employees, the employees become more attractive to other firms whose workplaces are operated and staffed differently. C

Question 2

What are the different modes of payments that employers use?

Accepted Answer

Pay comes in forms that include piecework; hourly wages; monthly salaries; various forms of sharing, commissions, and tips; and compensation based on company performance.The efficient form depends on such details as the measurability of output, the importance of team production, the impact of random events on productivity, and the observability of effort.

Question 3

What is investment in human capital?

Accepted Answer

The skills an individual chooses to develop in order to earn a living is called human capital.Acquiring new skills or improving existing ones is an investment in the same sense as a business owner's decision to build a new plant.Both will generate income over a span of years.Investments in human capital take place under uncertainty.Attending college allows a student to build up "general" human capital which can raise productivity in almost any job a graduate might take.More specific choices are riskier, because future technologies and markets are intrinsically difficult to predict.

Question 4

The market wage rate for a car mechanic is $30 per week.Peter, who owns a garage, is in urgent need of a mechanic to head his existing employees.He is willing to hire Alex and pay $8 extra in order to make sure that Alex puts in his best efforts.If Alex accepts the job, which of the following statements will be true?

Accepted Answer

A) There is no disutility of hard work for Alex as his pay exceeds the market wage rate. 
B) Alex has no incentive to put in his best efforts on this job. 
C) Alex's disutility of extra effort in this new job is less than the utility from extra pay. 
D) Peter's benefit from hiring Alex will be limited as he is paying above the market wage rate. 
A) There is no disutility of hard work for Alex as his pay exceeds the market wage rate. 
B) Alex has no incentive to put in his best efforts on this job. 
C) Alex's disutility of extra effort in this new job is less than the utility from extra pay. 
D) Peter's benefit from hiring Alex will be limited as he is paying above the market wage rate.

Question 5

Lisa's hourly pay increases from $8 to $10 as her performance improves.We can conclude that:

Accepted Answer

A) her marginal cost of leisure declines. 
B) her opportunity cost of leisure increases. 
C) her opportunity cost of work increases. 
D) her marginal cost of work declines. 
A) her marginal cost of leisure declines. 
B) her opportunity cost of leisure increases. 
C) her opportunity cost of work increases. 
D) her marginal cost of work declines.

Question 6

_____ allow an individual to buy a company's stock at a pre-determined price on or after a certain future date.

Accepted Answer

A) Arbitrage 
B) Futures contracts 
C) Options 
D) Spot markets 
A) Arbitrage 
B) Futures contracts 
C) Options 
D) Spot markets

Question 7

The following figure gives the total product of labor at different levels of labor use per day.The market price of the product is $10 per unit and the market wage rate is $8 per day.

$$\begin{array} { c | c } 
\begin{array} { l } 
\text { Labor } \
\text { Employed }
\end{array} & \begin{array} { l } 
\text { Total Product } \
\text { (in units) }
\end{array} \
\hline 4 & 17 \
5 & 20 \
6 & 25 \
7 & 28 \
8 & 30
\end{array}$$
-Refer to Table .The marginal product of labor is the highest when the firm hires _____ workers.

Accepted Answer

A) 5 
B) 6 
C) 7 
D) 8 
A) 5 
B) 6 
C) 7 
D) 8

Question 8

_____ is an example of specific human capital.

Accepted Answer

A) High school education 
B) A bachelor's degree in Economics 
C) On-the-job learning for a sales executive 
D) A PhD in astrophysics 
A) High school education 
B) A bachelor's degree in Economics 
C) On-the-job learning for a sales executive 
D) A PhD in astrophysics

Question 9

Hourly wages solve the problem of monitoring waiters' performances for a restaurant owner.

Accepted Answer

A) True 
 B)False

Question 10

Jason is a salesman who gets 40 percent of the revenue he generates for his company.This is an example of payment by _____.

Accepted Answer

A) piece rent 
B) fixed salary 
C) executive compensation 
D) share contract 
A) piece rent 
B) fixed salary 
C) executive compensation 
D) share contract

Question 11

What causes employers or employees to behave opportunistically?

Accepted Answer

Incompleteness of contracts give both th

Question 12

A disadvantage of options as instruments of performance-related rewards is:

Accepted Answer

A) that it exposes the executives to market volatility. 
B) that it increases opportunistic behavior on the part of the employees who expect to earn these incentives. 
C) that the actual monetary gains from such incentives are usually lower than other performance-related incentives provided by organizations. 
D) that once an option has been exercised and the executive has sold her shares it will have no continuing effect on her incentives to make better future decisions. 
A) that it exposes the executives to market volatility. 
B) that it increases opportunistic behavior on the part of the employees who expect to earn these incentives. 
C) that the actual monetary gains from such incentives are usually lower than other performance-related incentives provided by organizations. 
D) that once an option has been exercised and the executive has sold her shares it will have no continuing effect on her incentives to make better future decisions.

Question 13

Back-loading of employees' wages helps a company because:

Accepted Answer

A) they act as incentives for employees to work hard throughout their tenure with the company. 
B) they completely eliminate all sorts of opportunistic behavior on the part of the employee throughout his/her tenure with the company. 
C) they reduce the actual cost burden of the employee on the company. 
D) they prevent opportunistic behavior on the employer's part. 
A) they act as incentives for employees to work hard throughout their tenure with the company. 
B) they completely eliminate all sorts of opportunistic behavior on the part of the employee throughout his/her tenure with the company. 
C) they reduce the actual cost burden of the employee on the company. 
D) they prevent opportunistic behavior on the employer's part.

Question 14

Spending time and money on education are costs of investing in human capital.

Accepted Answer

A) True 
 B)False

Question 15

Why are most contracts incomplete?

Accepted Answer

As far as implicit contracts are concern

Question 16

Differing productivities, differences in working conditions, and localized employer market power are some of the reasons which explain differences in individual wages.

Accepted Answer

A) True 
 B)False

Question 17

Why do firms opt for internal labor markets when they may be able to find more candidates with necessary qualifications outside?

Accepted Answer

In a firm where team production prevails

Question 18

Which of the following assumptions is made while determining equilibrium wage and labor employed in the economy?

Accepted Answer

A) Information about job vacancies is difficult to obtain for workers. 
B) Mobility of workers is limited, i.e., workers can not switch jobs easily. 
C) Jobs vary widely in scope and responsibilities. 
D) All person-hours of labor are treated as identical. 
A) Information about job vacancies is difficult to obtain for workers. 
B) Mobility of workers is limited, i.e., workers can not switch jobs easily. 
C) Jobs vary widely in scope and responsibilities. 
D) All person-hours of labor are treated as identical.

Question 19

Labor and capital are often complements in production because the use of capital enhances the productivity of the labor and vice versa.

Accepted Answer

A) True 
 B)False

Question 20

How does value of marginal product (VMP) of labor determine the number of workers a competitive firm will hire?

Accepted Answer

A firm's goal is to maximize profits.Hir

Which of the following statements is true about investments in general and specific human capital?

What are the different modes of payments that employers use?

What is investment in human capital?

Lisa's hourly pay increases from $8 to $10 as her performance improves.We can conclude that:

_____ allow an individual to buy a company's stock at a pre-determined price on or after a certain future date.

_____ is an example of specific human capital.

Hourly wages solve the problem of monitoring waiters' performances for a restaurant owner.

Jason is a salesman who gets 40 percent of the revenue he generates for his company.This is an example of payment by _____.

What causes employers or employees to behave opportunistically?

A disadvantage of options as instruments of performance-related rewards is:

Back-loading of employees' wages helps a company because:

Spending time and money on education are costs of investing in human capital.

Why are most contracts incomplete?

Differing productivities, differences in working conditions, and localized employer market power are some of the reasons which explain differences in individual wages.

Why do firms opt for internal labor markets when they may be able to find more candidates with necessary qualifications outside?

Which of the following assumptions is made while determining equilibrium wage and labor employed in the economy?

Labor and capital are often complements in production because the use of capital enhances the productivity of the labor and vice versa.

How does value of marginal product (VMP) of labor determine the number of workers a competitive firm will hire?

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters

Exam 15: Employment Relationships

Which of the following statements is true about investments in general and specific human capital?

What are the different modes of payments that employers use?

What is investment in human capital?

Lisa's hourly pay increases from $8 to $10 as her performance improves.We can conclude that:

_____ allow an individual to buy a company's stock at a pre-determined price on or after a certain future date.

_____ is an example of specific human capital.

Hourly wages solve the problem of monitoring waiters' performances for a restaurant owner.

Jason is a salesman who gets 40 percent of the revenue he generates for his company.This is an example of payment by _____.

What causes employers or employees to behave opportunistically?

A disadvantage of options as instruments of performance-related rewards is:

Back-loading of employees' wages helps a company because:

Spending time and money on education are costs of investing in human capital.

Why are most contracts incomplete?

Differing productivities, differences in working conditions, and localized employer market power are some of the reasons which explain differences in individual wages.

Why do firms opt for internal labor markets when they may be able to find more candidates with necessary qualifications outside?

Which of the following assumptions is made while determining equilibrium wage and labor employed in the economy?

Labor and capital are often complements in production because the use of capital enhances the productivity of the labor and vice versa.

How does value of marginal product (VMP) of labor determine the number of workers a competitive firm will hire?

Reasoning With Economics: Models and Information

Transactions and Institutions: the Building Blocks

Markets

Cost and Production

Extreme Markets I: Perfect Competition

Extreme Markets II: Monopoly

Between the Extremes: Interaction and Strategy

Competition and Strategy

Beyond Markets; Property and Contracts

The Economics of Contracts

Risk and Information in Contracts

Organizations in Concept and Practice

Organizational Design

Vertical Relationships

Time, Risk and Options

Conflict, Negotiation and Group Choice

Filters