Question 1

A piece rate compensation system

Accepted Answer

A)  underemphasizes the quantity of output produced. 
B)  attracts and benefits the most able workers. 
C)  inherently hurts minorities. 
D)  decreases a firm's productivity. 
E)  has no disadvantages. 
A)  underemphasizes the quantity of output produced. 
B)  attracts and benefits the most able workers. 
C)  inherently hurts minorities. 
D)  decreases a firm's productivity. 
E)  has no disadvantages.

Question 2

What prevents a firm from offering a delayed-compensation scheme to its employees and then firing each worker when the worker's wage exceeds his or her value of marginal product?

Accepted Answer

A)  Firms that offer delayed-compensation schemes are legally barred from firing workers. 
B)  Profits would increase by allowing the worker to continue on. 
C)  The worker will have already retired by the time the worker's value of marginal product exceeds his or her wage. 
D)  Profits are insensitive to when the worker quits his job. 
E)  The firm would lose the trust of the workers, and new workers would not accept the payment scheme. 
A)  Firms that offer delayed-compensation schemes are legally barred from firing workers. 
B)  Profits would increase by allowing the worker to continue on. 
C)  The worker will have already retired by the time the worker's value of marginal product exceeds his or her wage. 
D)  Profits are insensitive to when the worker quits his job. 
E)  The firm would lose the trust of the workers, and new workers would not accept the payment scheme.

Question 3

An efficiency wage is defined as

Accepted Answer

A)  a wage above the competitive wage that elicits greater effort on the part of workers. 
B)  a wage below the competitive wage that elicits greater effort on the part of the workers. 
C)  any wage scheme that is accepted by the union. 
D)  any wage scheme that pays different workers different wages. 
E)  any wage scheme that pays all workers the same wage. 
A)  a wage above the competitive wage that elicits greater effort on the part of workers. 
B)  a wage below the competitive wage that elicits greater effort on the part of the workers. 
C)  any wage scheme that is accepted by the union. 
D)  any wage scheme that pays different workers different wages. 
E)  any wage scheme that pays all workers the same wage.

Question 4

When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

Accepted Answer

A)  shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits. 
B)  the CEO is paid in part with stock options. 
C)  shareholders cannot observe all of the CEO's decisions. 
D)  shareholders sign confidentiality agreements. 
E)  shareholders require the firm to pay a dividend. 
A)  shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits. 
B)  the CEO is paid in part with stock options. 
C)  shareholders cannot observe all of the CEO's decisions. 
D)  shareholders sign confidentiality agreements. 
E)  shareholders require the firm to pay a dividend.

Question 5

What happens to the piece rate if there is a ratchet effect?

Accepted Answer

A)  It decreases over time. 
B)  It increases over time. 
C)  It is replaced with a time rate. 
D)  It is replaced with a salary contract. 
E)  It is only paid to the least productive workers. 
A)  It decreases over time. 
B)  It increases over time. 
C)  It is replaced with a time rate. 
D)  It is replaced with a salary contract. 
E)  It is only paid to the least productive workers.

Question 6

Empirically, the relationship between CEO performance (measured in terms of share price) and CEO compensation is

Accepted Answer

A)  large and positive. 
B)  small and positive. 
C)  nonexistent. 
D)  small and negative. 
E)  large and negative. 
A)  large and positive. 
B)  small and positive. 
C)  nonexistent. 
D)  small and negative. 
E)  large and negative.

Question 7

Principal-agent problems arise when

Accepted Answer

A)  the principal negotiates contracts on behalf of the agent. 
B)  the agent negotiates contracts on behalf of the principal. 
C)  the agent's objectives are different from the principal's objectives. 
D)  firm owners (the principals) pay employee wages (the agents) based on race. 
E)  workers (the principals) work harder when the firm owners (the agents) increase wages. 
A)  the principal negotiates contracts on behalf of the agent. 
B)  the agent negotiates contracts on behalf of the principal. 
C)  the agent's objectives are different from the principal's objectives. 
D)  firm owners (the principals) pay employee wages (the agents) based on race. 
E)  workers (the principals) work harder when the firm owners (the agents) increase wages.

Question 8

Middle-aged workers being paid more than their younger counterparts is likely due to

Accepted Answer

A)  the natural inverse relationship between age and experience. 
B)  the implementation of a mandatory retirement age by the firm. 
C)  more recent education and job training programs being more effective than older programs. 
D)  firms using a delayed compensation scheme. 
E)  workers prefer delaying their earnings to as late in life as possible. 
A)  the natural inverse relationship between age and experience. 
B)  the implementation of a mandatory retirement age by the firm. 
C)  more recent education and job training programs being more effective than older programs. 
D)  firms using a delayed compensation scheme. 
E)  workers prefer delaying their earnings to as late in life as possible.

Question 9

One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?

Accepted Answer

A)  Dual labor markets exist. 
B)  There are compensating differentials being paid depending on the type of work being done. 
C)  Unemployment is constant across sectors. 
D)  High-wage firms take advantage of delayed-compensation contracts. 
E)  Workers voluntarily provide bonds in case they are caught shirking. 
A)  Dual labor markets exist. 
B)  There are compensating differentials being paid depending on the type of work being done. 
C)  Unemployment is constant across sectors. 
D)  High-wage firms take advantage of delayed-compensation contracts. 
E)  Workers voluntarily provide bonds in case they are caught shirking.

Question 10

Which of the following is not likely to help a firm motivate its workers to put forth more effort?

Accepted Answer

A)  providing a free or subsidized company gym and/or cafeteria 
B)  installing monitoring equipment 
C)  providing competitive year-end bonuses 
D)  implementing a profit-sharing scheme 
E)  All of these are likely to motivate workers to put forth more effort. 
A)  providing a free or subsidized company gym and/or cafeteria 
B)  installing monitoring equipment 
C)  providing competitive year-end bonuses 
D)  implementing a profit-sharing scheme 
E)  All of these are likely to motivate workers to put forth more effort.

A piece rate compensation system

What prevents a firm from offering a delayed-compensation scheme to its employees and then firing each worker when the worker's wage exceeds his or her value of marginal product?

An efficiency wage is defined as

When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

What happens to the piece rate if there is a ratchet effect?

Empirically, the relationship between CEO performance (measured in terms of share price) and CEO compensation is

Principal-agent problems arise when

Middle-aged workers being paid more than their younger counterparts is likely due to

One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?

Which of the following is not likely to help a firm motivate its workers to put forth more effort?

Introduction to Labor Economics

Labor Supply

Labor Demand

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Unemployment

Filters

Exam 11: Incentive Pay

A piece rate compensation system

What prevents a firm from offering a delayed-compensation scheme to its employees and then firing each worker when the worker's wage exceeds his or her value of marginal product?

An efficiency wage is defined as

When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because

What happens to the piece rate if there is a ratchet effect?

Empirically, the relationship between CEO performance (measured in terms of share price) and CEO compensation is

Principal-agent problems arise when

Middle-aged workers being paid more than their younger counterparts is likely due to

One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?

Which of the following is not likely to help a firm motivate its workers to put forth more effort?

Introduction to Labor Economics

Labor Supply

Labor Demand

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Unemployment

Filters