Question 1

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

Accepted Answer

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

Question 2

Having the government regulate work-place safety would most likely improve economic efficiency if

Accepted Answer

A) the cost of introducing safety equipment is high. 
B) workers value safe work environments. 
C) workers are unable to correctly judge the risk associated with a particular job. 
D) firms are unable to attract workers to safe jobs. 
E) firms and workers differ on the value they place on safe versus risky jobs. 
A) the cost of introducing safety equipment is high. 
B) workers value safe work environments. 
C) workers are unable to correctly judge the risk associated with a particular job. 
D) firms are unable to attract workers to safe jobs. 
E) firms and workers differ on the value they place on safe versus risky jobs.

Question 3

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

Question 4

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 5

The equilibrium hedonic wage function is most likely

Accepted Answer

A) horizontal as no firm will over-pay for workers. 
B) horizontal as firms will choose their optimal level of safety. 
C) a single point, as all firms will choose the same level of risk, and consequently all workers will be paid the same wage. 
D) upward sloping as firms that offer riskier jobs usually pay higher wages. 
E) downward sloping as firms that offer riskier jobs are usually able to pay lower wages. 
A) horizontal as no firm will over-pay for workers. 
B) horizontal as firms will choose their optimal level of safety. 
C) a single point, as all firms will choose the same level of risk, and consequently all workers will be paid the same wage. 
D) upward sloping as firms that offer riskier jobs usually pay higher wages. 
E) downward sloping as firms that offer riskier jobs are usually able to pay lower wages.

Question 6

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 7

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 exist at the safest levels. 
C) the hedonic wage function may no longer exist 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 exist at the safest levels. 
C) the hedonic wage function may no longer exist at the riskiest levels. 
D) average wages increase. 
E) for the same amount of output produced, total production costs will be less.

Question 8

A firm has the choice of offering "dirty" jobs that are likely to cause severe health problems for its workers or of offering "clean" jobs by installing safety equipment at a cost of $5 per hour per employee that will substantially reduce the chances of health problems.The firm will

Accepted Answer

A) install the safety equipment if workers can ascertain whether they are working a dirty or a clean job. 
B) install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job. 
C) never willingly choose to install the costly safety equipment. 
D) never install the safety equipment without a government subsidy to do so. 
E) willingly install the safety equipment if workers are willing to be paid $7 per hour less in a clean job than in a dirty job. 
A) install the safety equipment if workers can ascertain whether they are working a dirty or a clean job. 
B) install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job. 
C) never willingly choose to install the costly safety equipment. 
D) never install the safety equipment without a government subsidy to do so. 
E) willingly install the safety equipment if workers are willing to be paid $7 per hour less in a clean job than in a dirty job.

Question 9

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 10

Estimates of the compensating wage differentials associated with particular job characteristics are valid only if

Accepted Answer

A) all other factors that influence worker's wages are held constant. 
B) non-wage characteristics of the job are allowed to vary by sector. 
C) firms are willing to pay higher wages to more skilled workers. 
D) the compensation wage equals the worker's marginal cost. 
E) the firm provides non-pecuniary compensation for risks that workers encounter on the job. 
A) all other factors that influence worker's wages are held constant. 
B) non-wage characteristics of the job are allowed to vary by sector. 
C) firms are willing to pay higher wages to more skilled workers. 
D) the compensation wage equals the worker's marginal cost. 
E) the firm provides non-pecuniary compensation for risks that workers encounter on the job.

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

Having the government regulate work-place safety would most likely improve economic efficiency if

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

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

The equilibrium hedonic wage function is most likely

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

A potential implication of OSHA regulation is that

A firm has the choice of offering "dirty" jobs that are likely to cause severe health problems for its workers or of offering "clean" jobs by installing safety equipment at a cost of $5 per hour per employee that will substantially reduce the chances of health problems.The firm will

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:

Estimates of the compensating wage differentials associated with particular job characteristics are valid only if

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

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

Having the government regulate work-place safety would most likely improve economic efficiency if

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

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

The equilibrium hedonic wage function is most likely

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

A potential implication of OSHA regulation is that

A firm has the choice of offering "dirty" jobs that are likely to cause severe health problems for its workers or of offering "clean" jobs by installing safety equipment at a cost of $5 per hour per employee that will substantially reduce the chances of health problems.The firm will

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:

Estimates of the compensating wage differentials associated with particular job characteristics are valid only if

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