Question 1

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 2

Under a piece rate pay scheme where all workers face different upward-sloped marginal cost curves for providing effort,

Accepted Answer

A) all workers will provide the same amount of effort. 
B) all workers will produce the same amount of output. 
C) all workers will be paid the same amount. 
D) workers with higher marginal cost curves for providing effort will produce more output than workers with lower marginal cost curves. 
E) workers with higher marginal cost curves for providing effort will produce less output than workers with lower marginal cost curves. 
A) all workers will provide the same amount of effort. 
B) all workers will produce the same amount of output. 
C) all workers will be paid the same amount. 
D) workers with higher marginal cost curves for providing effort will produce more output than workers with lower marginal cost curves. 
E) workers with higher marginal cost curves for providing effort will produce less output than workers with lower marginal cost curves.

Question 3

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) The existence of dual labor markets. 
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) The existence of dual labor markets. 
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 4

_______ are most closely associated with creating a pool of workers who are involuntarily unemployed.

Accepted Answer

A) Piece rates 
B) Incentive pay schemes 
C) Time rates 
D) Efficiency wages 
E) Profit sharing schemes 
A) Piece rates 
B) Incentive pay schemes 
C) Time rates 
D) Efficiency wages 
E) Profit sharing schemes

Question 5

One argument against using a profit-sharing scheme is the potential for free-riding.In this situation, free-riding refers to

Accepted Answer

A) one firm using the same contract specifications as another firm. 
B) a worker not providing effort because his contribution to profit is very small. 
C) a worker not providing effort because he doesn't want his co-workers' wages to increase. 
D) the firm not honestly reporting its profits. 
E) profits being insensitive to worker effort because all increases in profit are returned to the workers due to the profit-sharing scheme. 
A) one firm using the same contract specifications as another firm. 
B) a worker not providing effort because his contribution to profit is very small. 
C) a worker not providing effort because he doesn't want his co-workers' wages to increase. 
D) the firm not honestly reporting its profits. 
E) profits being insensitive to worker effort because all increases in profit are returned to the workers due to the profit-sharing scheme.

Question 6

A standard efficiency wage model pays workers higher wages in order to increase worker efficiency.As a result, firm profits increase and there is a pool of involuntarily unemployed workers.In this model, if the firm's cost of monitoring effort falls,

Accepted Answer

A) the efficiency wage will fall. 
B) the number of shirking workers will fall. 
C) firm profits will fall. 
D) the firm will increase its number of factory managers. 
E) the pool of involuntarily unemployed workers will increase. 
A) the efficiency wage will fall. 
B) the number of shirking workers will fall. 
C) firm profits will fall. 
D) the firm will increase its number of factory managers. 
E) the pool of involuntarily unemployed workers will increase.

Question 7

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 the above 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 the above are likely to motivate workers to put forth more effort.

Question 8

Which of the following statements is false?

Accepted Answer

A) Profit sharing redistributes profits back to the workers. 
B) Bonuses are frequently linked to performance. 
C) Bonuses are paid in addition to base salary. 
D) Free-riding can result from a compensation scheme that gives competitive individual bonuses. 
E) Free-riding can result from profit sharing. 
A) Profit sharing redistributes profits back to the workers. 
B) Bonuses are frequently linked to performance. 
C) Bonuses are paid in addition to base salary. 
D) Free-riding can result from a compensation scheme that gives competitive individual bonuses. 
E) Free-riding can result from profit sharing.

Question 9

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 10

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

Accepted Answer

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

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

Under a piece rate pay scheme where all workers face different upward-sloped marginal cost curves for providing effort,

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?

_______ are most closely associated with creating a pool of workers who are involuntarily unemployed.

One argument against using a profit-sharing scheme is the potential for free-riding.In this situation, free-riding refers to

A standard efficiency wage model pays workers higher wages in order to increase worker efficiency.As a result, firm profits increase and there is a pool of involuntarily unemployed workers.In this model, if the firm's cost of monitoring effort falls,

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

Which of the following statements is false?

Principal-agent problems arise when

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

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

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

Under a piece rate pay scheme where all workers face different upward-sloped marginal cost curves for providing effort,

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?

_______ are most closely associated with creating a pool of workers who are involuntarily unemployed.

One argument against using a profit-sharing scheme is the potential for free-riding.In this situation, free-riding refers to

A standard efficiency wage model pays workers higher wages in order to increase worker efficiency.As a result, firm profits increase and there is a pool of involuntarily unemployed workers.In this model, if the firm's cost of monitoring effort falls,

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

Which of the following statements is false?

Principal-agent problems arise when

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

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