Question 1

The correlation between wages and the probability of encountering a fatal injury while on the jobs can be used to calculate:

Accepted Answer

A) the value of risk. 
B) the value of safety. 
C) the value of life. 
D) the value of injury. 
E) the value of work. 
A) the value of risk. 
B) the value of safety. 
C) the value of life. 
D) the value of injury. 
E) the value of work.

Question 2

A hedonic wage function could be applied to which of the following job characteristics?

Accepted Answer

A) The probability of being injured on the job. 
B) The degree to which a job involves monotonous work. 
C) The degree to which the area surrounding the job location is safe. 
D) The degree to which a job involves strenuous work. 
E) All of the above can be represented with a hedonic wage function. 
A) The probability of being injured on the job. 
B) The degree to which a job involves monotonous work. 
C) The degree to which the area surrounding the job location is safe. 
D) The degree to which a job involves strenuous work. 
E) All of the above can be represented with a hedonic wage function.

Question 3

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 4

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likey to

Accepted Answer

A) be associated with more fringe benefits. 
B) be associated with fewer fringe benefits. 
C) pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states. 
D) have worse working conditions. 
E) be seasonal in nature. 
A) be associated with more fringe benefits. 
B) be associated with fewer fringe benefits. 
C) pay the same wage and offer the same fringe benefits package as the same jobs in lower-tax states. 
D) have worse working conditions. 
E) be seasonal in nature.

Question 5

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) never willingly choose to install the costly safety equipment. 
C) never install the safety equipment without a government subsidy to do so. 
D) install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job. 
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) never willingly choose to install the costly safety equipment. 
C) never install the safety equipment without a government subsidy to do so. 
D) install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job. 
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 6

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 7

Suppose 1 in 200 pilots flying Space-X aircraft dies each year while only 1 in 500 pilots flying Subspace Gliders dies each year. Moreover, the average salary of Space-X pilots is $115,000, while the average salary of Subspace Glider pilots is $109,000. Given this information, what is the implied statistical value of a life of a pilot?

Accepted Answer

A) $6,000 
B) $120,000 
C) $480,000 
D) $1,200,000 
E) $2,000,000 
A) $6,000 
B) $120,000 
C) $480,000 
D) $1,200,000 
E) $2,000,000

Question 8

In order for the compensating differential associated with a risky job to be negative (so that a risky job pays less than a non-risky job), it must be that

Accepted Answer

A) many workers are willing to work the risky job for free. 
B) most workers prefer the risky job to the safe job when both wages are equal. 
C) the number of risky jobs is less than the number of workers who prefer the risky job. 
D) there is great demand for labor in both sectors. 
E) the government mandates that the wages in the two sectors be equal. 
A) many workers are willing to work the risky job for free. 
B) most workers prefer the risky job to the safe job when both wages are equal. 
C) the number of risky jobs is less than the number of workers who prefer the risky job. 
D) there is great demand for labor in both sectors. 
E) the government mandates that the wages in the two sectors be equal.

Question 9

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 10

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.

The correlation between wages and the probability of encountering a fatal injury while on the jobs can be used to calculate:

A hedonic wage function could be applied to which of the following job characteristics?

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

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likey to

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

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

In order for the compensating differential associated with a risky job to be negative (so that a risky job pays less than a non-risky job), it must be that

The equilibrium hedonic wage function is most likely

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:

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

The correlation between wages and the probability of encountering a fatal injury while on the jobs can be used to calculate:

A hedonic wage function could be applied to which of the following job characteristics?

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

One implication of the theory of compensating differentials is that jobs in states with high income tax rates are likey to

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

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

In order for the compensating differential associated with a risky job to be negative (so that a risky job pays less than a non-risky job), it must be that

The equilibrium hedonic wage function is most likely

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:

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