Question 1

Risk-averse workers

Accepted Answer

A) have shallow wage-risk indifference curves when risk is graphed on the x-axis. 
B) are willing to work in riskier environments for a relatively low increase in the wage. 
C) are willing to accept large wage decreases in exchange for a safer work environment. 
D) never work in risky environments. 
E) are more productive than risk-loving workers. 
A) have shallow wage-risk indifference curves when risk is graphed on the x-axis. 
B) are willing to work in riskier environments for a relatively low increase in the wage. 
C) are willing to accept large wage decreases in exchange for a safer work environment. 
D) never work in risky environments. 
E) are more productive than risk-loving workers. C

Question 2

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

Accepted Answer

A) All points on each isoprofit curve yield the same level of profit. 
B) Profit-maximizing firms are indifferent as to where they operate on any given curve. 
C) Isoprofit curves going out along the x-axis yield higher profits. 
D) Isoprofit curves going up along the y-axis yield higher profits. 
E) Isoprofit lines are upward sloping. 
A) All points on each isoprofit curve yield the same level of profit. 
B) Profit-maximizing firms are indifferent as to where they operate on any given curve. 
C) Isoprofit curves going out along the x-axis yield higher profits. 
D) Isoprofit curves going up along the y-axis yield higher profits. 
E) Isoprofit lines are upward sloping. D

Question 3

The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to

Accepted Answer

A) randomly match workers to jobs. 
B) match workers who dislike risk to the highest paying jobs. 
C) match workers who dislike risk to firms that find it cheapest to offer safe jobs. 
D) have firms that face a high cost of offering safe jobs to pay the lowest wages. 
E) have firms randomly choose their level of safety. 
A) randomly match workers to jobs. 
B) match workers who dislike risk to the highest paying jobs. 
C) match workers who dislike risk to firms that find it cheapest to offer safe jobs. 
D) have firms that face a high cost of offering safe jobs to pay the lowest wages. 
E) have firms randomly choose their level of safety. C

Question 4

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 5

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 6

Abby's reservation price for working in a risky job is $5 per hour while Rudy's reservation price for working in a risky job is $8 per hour. Characterize Abby and Rudy's job selections if safe jobs pay $12 per hour and risky jobs pay $18 per hour.

Accepted Answer

A) Abby and Rudy both work a safe job. 
B) Abby works a safe job while Rudy works a risky job. 
C) Abby works a risky job while Rudy works a safe job. 
D) Abby and Rudy both work risky jobs. 
E) Rudy works a risky job while Abby doesn't care which type of job she works. 
A) Abby and Rudy both work a safe job. 
B) Abby works a safe job while Rudy works a risky job. 
C) Abby works a risky job while Rudy works a safe job. 
D) Abby and Rudy both work risky jobs. 
E) Rudy works a risky job while Abby doesn't care which type of job she works.

Question 7

When a worker and firm are matched on the hedonic wage function, it is implied that

Accepted Answer

A) the worker cannot receive a higher wage at any other firm. 
B) the worker-firm match is efficient in the sense that neither the worker nor the firm could become better off with a different match. 
C) the firm could increase its profits by offering a safer job as doing so would allow the firm to lower the wage it pays. 
D) the hedonic wage function must be very steeply sloped to ensure that the worker doesn't accept a better paying job. 
E) the worker receives no surplus from the match. 
A) the worker cannot receive a higher wage at any other firm. 
B) the worker-firm match is efficient in the sense that neither the worker nor the firm could become better off with a different match. 
C) the firm could increase its profits by offering a safer job as doing so would allow the firm to lower the wage it pays. 
D) the hedonic wage function must be very steeply sloped to ensure that the worker doesn't accept a better paying job. 
E) the worker receives no surplus from the match.

Question 8

If the U.S. system of unemployment insurance didn't exist, one would predict that

Accepted Answer

A) workers would never become unemployed. 
B) workers who became unemployed would remain unemployed for longer durations. 
C) no worker would accept a job that is associated with seasonal unemployment. 
D) seasonal unemployment would cease to exist. 
E) workers in jobs that have high risks of unemployment or in jobs that face seasonal cycles of unemployment would be paid higher wages. 
A) workers would never become unemployed. 
B) workers who became unemployed would remain unemployed for longer durations. 
C) no worker would accept a job that is associated with seasonal unemployment. 
D) seasonal unemployment would cease to exist. 
E) workers in jobs that have high risks of unemployment or in jobs that face seasonal cycles of unemployment would be paid higher wages.

Question 9

In the standard theory of compensating differentials, a worker's reservation price is

Accepted Answer

A) the amount of money it takes to entice the worker into accepting a risky job. 
B) the amount of money it costs a worker to take a risky job. 
C) the amount of money a worker loses for not taking any job. 
D) the amount of money it costs a worker to take a safe job. 
E) the difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs. 
A) the amount of money it takes to entice the worker into accepting a risky job. 
B) the amount of money it costs a worker to take a risky job. 
C) the amount of money a worker loses for not taking any job. 
D) the amount of money it costs a worker to take a safe job. 
E) the difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs.

Question 10

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 11

A standard hedonic wage function might show what relationship?

Accepted Answer

A) The relationship between the wage and a worker's age. 
B) The relationship between the wage and a worker's race. 
C) The relationship between the wage and a worker's gender. 
D) The relationship between the wage and the probability of injury faced by the worker. 
E) The relationship between the wage and a worker's skill level. 
A) The relationship between the wage and a worker's age. 
B) The relationship between the wage and a worker's race. 
C) The relationship between the wage and a worker's gender. 
D) The relationship between the wage and the probability of injury faced by the worker. 
E) The relationship between the wage and a worker's skill level.

Question 12

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 13

Assuming that workers are fully aware of their working conditions, which of the following will not happen when the government mandates pollution control to protect workers' health?

Accepted Answer

A) Worker utility will increase. 
B) Employment will decrease. 
C) The air in workplaces will become cleaner. 
D) Firms with low-profits before the mandate may shut down or exit the industry. 
E) Wages will fall at all but the cleanest firms. 
A) Worker utility will increase. 
B) Employment will decrease. 
C) The air in workplaces will become cleaner. 
D) Firms with low-profits before the mandate may shut down or exit the industry. 
E) Wages will fall at all but the cleanest firms.

Question 14

The value of life is calculated by comparing

Accepted Answer

A) wages to risk levels. 
B) risk levels to the number of children in a worker's household. 
C) wages to the number of children in a worker's household. 
D) average life expectancy by occupation to average risk levels by industry. 
E) average wages to the average retirement age. 
A) wages to risk levels. 
B) risk levels to the number of children in a worker's household. 
C) wages to the number of children in a worker's household. 
D) average life expectancy by occupation to average risk levels by industry. 
E) average wages to the average retirement age.

Question 15

The market-clearing wage differential between a safe and a risky job is $5,000. Which of the following is not true?

Accepted Answer

A) The marginal worker is indifferent between working the safe or the risky job. 
B) All but the marginal worker in safe jobs require a wage differential above $5,000 to accept a risky job. 
C) All but the marginal worker in the risky job require a wage differential below $5,000 to be indifferent between safe and risky jobs. 
D) The per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5,000. 
E) The average per-worker cost of offering safe jobs exceeds $5,000 at the risky firms. 
A) The marginal worker is indifferent between working the safe or the risky job. 
B) All but the marginal worker in safe jobs require a wage differential above $5,000 to accept a risky job. 
C) All but the marginal worker in the risky job require a wage differential below $5,000 to be indifferent between safe and risky jobs. 
D) The per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5,000. 
E) The average per-worker cost of offering safe jobs exceeds $5,000 at the risky firms.

Question 16

Empirically, women who are married to a spouse who has access to health insurance earn higher wages and are less likely to be offered employer-sponsored health insurance than are married women whose spouse does not have access to health insurance. This pattern

Accepted Answer

A) is unexpected as wages should be unrelated to fringe benefits. 
B) supports the theory of compensating differentials as it indicates there is a trade-off between wages and benefits. 
C) supports the theory of compensating differentials as it indicates there is no trade-off between wages and benefits. 
D) fails to provide support for the theory of compensating differentials. 
E) contradicts the result that the hedonic wage function is upward-sloping. 
A) is unexpected as wages should be unrelated to fringe benefits. 
B) supports the theory of compensating differentials as it indicates there is a trade-off between wages and benefits. 
C) supports the theory of compensating differentials as it indicates there is no trade-off between wages and benefits. 
D) fails to provide support for the theory of compensating differentials. 
E) contradicts the result that the hedonic wage function is upward-sloping.

Question 17

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.

Question 18

The supply curve of labor to risky jobs reveals.

Accepted Answer

A) how many workers are willing to offer their labor to the risky job as a function of the wage differential between the risky job and the safe job. 
B) how many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the risky job. 
C) how many workers are willing to offer their labor to the safe job as a function of the wage paid to workers of the risky job. 
D) the number of workers who dislike risky jobs. 
E) the fraction of workers who dislike risky jobs. 
A) how many workers are willing to offer their labor to the risky job as a function of the wage differential between the risky job and the safe job. 
B) how many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the risky job. 
C) how many workers are willing to offer their labor to the safe job as a function of the wage paid to workers of the risky job. 
D) the number of workers who dislike risky jobs. 
E) the fraction of workers who dislike risky jobs.

Question 19

Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

Accepted Answer

A) Many firms that currently offer risky jobs will begin offering safe jobs. 
B) The fraction of people working safe jobs will decrease. 
C) The wage associated with risky jobs will decrease. 
D) The number of people working risky jobs will increase. 
E) The wage differential will decrease. 
A) Many firms that currently offer risky jobs will begin offering safe jobs. 
B) The fraction of people working safe jobs will decrease. 
C) The wage associated with risky jobs will decrease. 
D) The number of people working risky jobs will increase. 
E) The wage differential will decrease.

Question 20

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

Accepted Answer

A) Workers who originally worked safe jobs are helped by the policy. 
B) Firms that originally offered safe jobs are hurt by the policy. 
C) Workers who originally worked risky jobs are helped by the policy. 
D) Firms that originally offered risky jobs are hurt by the policy. 
E) No one is hurt by the new policy. 
A) Workers who originally worked safe jobs are helped by the policy. 
B) Firms that originally offered safe jobs are hurt by the policy. 
C) Workers who originally worked risky jobs are helped by the policy. 
D) Firms that originally offered risky jobs are hurt by the policy. 
E) No one is hurt by the new policy.

Risk-averse workers

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to

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

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

Abby's reservation price for working in a risky job is $5 per hour while Rudy's reservation price for working in a risky job is $8 per hour. Characterize Abby and Rudy's job selections if safe jobs pay $12 per hour and risky jobs pay $18 per hour.

When a worker and firm are matched on the hedonic wage function, it is implied that

If the U.S. system of unemployment insurance didn't exist, one would predict that

In the standard theory of compensating differentials, a worker's reservation price is

A potential implication of OSHA regulation is that

A standard hedonic wage function might show what relationship?

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

Assuming that workers are fully aware of their working conditions, which of the following will not happen when the government mandates pollution control to protect workers' health?

The value of life is calculated by comparing

The market-clearing wage differential between a safe and a risky job is $5,000. Which of the following is not true?

Empirically, women who are married to a spouse who has access to health insurance earn higher wages and are less likely to be offered employer-sponsored health insurance than are married women whose spouse does not have access to health insurance. This pattern

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

The supply curve of labor to risky jobs reveals.

Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

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

Risk-averse workers

Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?

The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to

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

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

Abby's reservation price for working in a risky job is $5 per hour while Rudy's reservation price for working in a risky job is $8 per hour. Characterize Abby and Rudy's job selections if safe jobs pay $12 per hour and risky jobs pay $18 per hour.

When a worker and firm are matched on the hedonic wage function, it is implied that

If the U.S. system of unemployment insurance didn't exist, one would predict that

In the standard theory of compensating differentials, a worker's reservation price is

A potential implication of OSHA regulation is that

A standard hedonic wage function might show what relationship?

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

Assuming that workers are fully aware of their working conditions, which of the following will not happen when the government mandates pollution control to protect workers' health?

The value of life is calculated by comparing

The market-clearing wage differential between a safe and a risky job is $5,000. Which of the following is not true?

Empirically, women who are married to a spouse who has access to health insurance earn higher wages and are less likely to be offered employer-sponsored health insurance than are married women whose spouse does not have access to health insurance. This pattern

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

The supply curve of labor to risky jobs reveals.

Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change?

Suppose there are two types of jobs-safe and risky. Safe jobs currently pay $10 per hour. Risky jobs currently pay $20 per hour. The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour. Which of the following is true?

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