Question 1

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 C

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

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

Accepted Answer

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

Question 4

Free rider problems tend to be largest when

Accepted Answer

A)  workers are paid by a piece-rate system. 
B)  workers are paid by group incentives. 
C)  workers are paid on commission. 
D)  firms are very small. 
A)  workers are paid by a piece-rate system. 
B)  workers are paid by group incentives. 
C)  workers are paid on commission. 
D)  firms are very small.

Question 5

What are the basic features of a promotion tournament? What are the potential problems with a promotion tournament?

Accepted Answer

A promotion tournament is a means by whi

Question 6

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 7

A researcher finds that earnings are directly related to the length of time with current employer (tenure)in a randomly selected sample of 35-year old male workers.How would you explain this finding?

Accepted Answer

There are three possible explanations.On

Question 8

Discuss the concept of an implicit contract in the context of employment.

Accepted Answer

An implicit employment contract is the i

Question 9

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 10

An employer and a worker,if both are honest and work hard,together produce $200,000 a year,of which the employer gets $50,000 and the worker $150,000.If either one is dishonest and lazy,they break up,the employer employs someone else and the worker gets another employer.The following shows what they might earn if they broke up.In which case is it likely that both the employer and the worker will be honest and hard-working?

Accepted Answer

A)  If they break up, the employer makes $60,000 and the worker $80,000. 
B)  If they break up, the employer makes $20,000 and the worker $175,000. 
C)  If they break up, the employer makes $75,000 and the worker $175,000. 
D)  If they break up, the employer makes $25,000 and the worker $125,000. 
A)  If they break up, the employer makes $60,000 and the worker $80,000. 
B)  If they break up, the employer makes $20,000 and the worker $175,000. 
C)  If they break up, the employer makes $75,000 and the worker $175,000. 
D)  If they break up, the employer makes $25,000 and the worker $125,000.

Question 11

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-averse 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-averse 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 12

Which of the following CANNOT explain why large firms tend to pay higher salaries?

Accepted Answer

A)  Large firms find monitoring more expensive. 
B)  Large firms allow less independence and have more rigid discipline. 
C)  Large firms find job vacancies less costly. 
D)  Efficiency wages work better in large firms. 
A)  Large firms find monitoring more expensive. 
B)  Large firms allow less independence and have more rigid discipline. 
C)  Large firms find job vacancies less costly. 
D)  Efficiency wages work better in large firms.

Question 13

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 14

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.

Question 15

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 16

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 17

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 18

About 30 percent of CEO pay is in the form of stock or stock options.What is the rationale for paying a chief executive officer with company stock or options to buy the company stock? What are the drawbacks of paying corporate decision makers with stock?

Accepted Answer

Paying corporate CEOs is a means by whic

Question 19

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-averse. 
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-averse.

Question 20

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.

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

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

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

Free rider problems tend to be largest when

What are the basic features of a promotion tournament? What are the potential problems with a promotion tournament?

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

A researcher finds that earnings are directly related to the length of time with current employer (tenure)in a randomly selected sample of 35-year old male workers.How would you explain this finding?

Discuss the concept of an implicit contract in the context of employment.

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)?

Which of the following CANNOT explain why large firms tend to pay higher salaries?

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

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?

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

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

Higher wages generally

About 30 percent of CEO pay is in the form of stock or stock options.What is the rationale for paying a chief executive officer with company stock or options to buy the company stock? What are the drawbacks of paying corporate decision makers with stock?

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

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

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 types of pay is NOT linked to output?

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

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

Free rider problems tend to be largest when

What are the basic features of a promotion tournament? What are the potential problems with a promotion tournament?

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

A researcher finds that earnings are directly related to the length of time with current employer (tenure)in a randomly selected sample of 35-year old male workers.How would you explain this finding?

Discuss the concept of an implicit contract in the context of employment.

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)?

Which of the following CANNOT explain why large firms tend to pay higher salaries?

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

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?

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

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

Higher wages generally

About 30 percent of CEO pay is in the form of stock or stock options.What is the rationale for paying a chief executive officer with company stock or options to buy the company stock? What are the drawbacks of paying corporate decision makers with stock?

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

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

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