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Contemporary Labor Economics 11th Edition Mcconnell Test Bank
Contemporary Labor Economics 11th Edition Mcconnell Test Bank
1. Assuming workers and jobs are identical, if information is perfect and job search and migration are
costless, then
A. labor may or may not flow among employers.
B. labor will flow among employers until all wages are equal.
C. labor will flow among employers until all economic profits are zero, but wages may be unequal.
D. all firms will hire the same number of workers in equilibrium and pay them all the same wage.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Explain the effects if all workers and jobs are homogeneous and all labor markets are perfectly competitive.
Topic: Perfect Competition: Homogeneous Workers and Jobs
2. Assuming workers and jobs are identical, if information is perfect but job search and migration are
costly, then
A. labor may or may not flow among employers.
B. labor will flow among employers until all wages are equal.
C. labor will flow among employers until all economic profits are zero, but wages may be unequal.
D. all firms will hire the same number of workers in equilibrium and pay them all the same wage.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-01 Explain the effects if all workers and jobs are homogeneous and all labor markets are perfectly competitive.
Topic: Perfect Competition: Homogeneous Workers and Jobs
Consider the two labor markets shown in the diagram above. The wage rates shown represent
A. long-run equilibrium.
B. long-run equilibrium if all nonwage aspects of the jobs are identical.
8-1
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C. long-run equilibrium provided the workers are in noncompeting groups.
D. long-run equilibrium if information is perfect and costless.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-01 Explain the effects if all workers and jobs are homogeneous and all labor markets are perfectly competitive.
Topic: Perfect Competition: Homogeneous Workers and Jobs
Suppose that all other nonwage aspects of the jobs in these two markets are identical.We would expect
labor supply in B to increase if
5. Of the following occupational groups, 2014 average hourly earnings were greatest among
A. service workers.
B. installation, maintenance, and repair workers.
C. production workers.
D. management, business, and financial workers.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
8-2
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Difficulty: 1 Easy
Learning Objective: 08-02 Describe patterns of wage differentials by industry, occupation, and location.
Topic: The Wage Structure: Overserved Differentials
8. Average hourly pay for production workers in the United States in 2013 was
A. higher than in most other industrialized countries in Europe and Asia.
B. lower than in most other industrialized countries in Europe and Asia.
C. about the same as in most other industrialized countries in Europe and Asia.
D. lower than in many other industrialized countries in Europe but greater than in newly industrialized
countries such as Singapore, Taiwan, and Korea.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-02 Describe patterns of wage differentials by industry, occupation, and location.
Topic: The Wage Structure: Overserved Differentials
10. Which of the following is not a source of persistent compensating wage differentials?
A. migration from lower paying jobs to higher paying jobs
B. fringe benefits
C. job status
D. different skill requirements
8-3
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of McGraw-Hill Education.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
11. Suppose all workers are identical but working for Ajax is more pleasant than working for Acme. In all
other non-wage respects, the two firms offer the same job characteristics. In equilibrium,
12. If job X pays more than identical job Y, then the wage rates will
A. remain different if mobility is costless.
B. remain different if information is perfect.
C. equalize because labor will migrate from X to Y.
D. equalize if information is perfect and mobility is costless.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
13. The wage rate paid workers at Flow, Inc. will most likely exceed that at otherwise identical Stock Co.
if
A. Flow, Inc. is a more prestigious firm than Stock Co.
B. earnings are subject to greater variability at Stock Co.
C. Stock Co. offers better pension and insurance benefits than Flow, Inc.
D. the demand for labor at Stock Co. exceeds the demand for labor at Flow, Inc.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
14. Refer to the diagram below, which represents a local labor market consisting of two submarkets. All
workers are assumed to be identical.
8-4
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of McGraw-Hill Education.
Assume that information is perfect, mobility between jobs is costless, and that all nonwage aspects of the
two are identical. The outcome shown in the diagram
A. represents an equilibrium.
B. does not represent an equilibrium. The demand for labor in market A will shift rightward, and that in
market B will shift leftward until wage rates equalize.
C. does not represent an equilibrium. The supply of labor in market A will shift leftward, and that in
market B will shift rightward until the wage rates equalize.
D. does not represent an equilibrium. The supply of labor in market B will shift leftward, and that in
market A will shift rightward until the wage rates equalize.
15. Refer to the diagram below, which represents a local labor market consisting of two submarkets. All
workers are assumed to be identical.
8-5
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Suppose that the wage in B is higher because workers perceive disutility of $2 associated with this job
relative to A. Assuming that information is perfect and mobility between jobs is costless, we can conclude
that
16. All else equal, the wage paid to steelworkers in Youngstown, Ohio, will be lower if
A. the cost of living in Youngstown is lower than elsewhere.
B. working in the steel industry is louder and more dangerous than similar jobs.
C. steelworkers have less control over their work environment than in similar jobs.
D. there are fewer prospects for promotion among steelworkers than in similar jobs.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
17. Which of the following would tend to increase labor supply to a particular job?
A. The employer cuts back the scope and coverage of the medical plan.
B. Vesting in the firm’s pension plan is pushed back from 1 year to 5 years.
C. The crime rate rises in the city where the job is located.
D. The perceived status of the job improves.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
8-6
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18. Lower-paid workers often seem to have less-desirable working conditions as well because
A. lower-paid workers tend to have proportionately greater fringe benefits.
B. employers discriminate against unskilled workers.
C. the compensating differential for skill often outweighs the compensating differential for poor working
conditions.
D. the compensating differential for poor working conditions often outweighs the compensating
differential for skill.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
19. People who receive relatively high pay also tend to work in a relatively desirable work environment.
This is probably because
20. Which of the following research findings would support an efficiency wage explanation of pay
differentials?
A. Firms with higher turnover costs pay lower than average wages.
B. Firms with higher costs of detecting shirking pay higher than average wages.
C. Pay is positively correlated with human capital investments in a given industry.
D. Differences in observable worker characteristics explain most of the variance in pay across industries.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
21. Suppose a firm decides to raise pay as a way to reduce worker turnover.The resulting pay differential
A. is a transitional differential.
B. will reduce labor supply to the firm.
C. will normally be offset by other pay differentials, leaving the policy ineffective.
D. is an equilibrium differential.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
8-7
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22. All else equal, large firms tend to pay higher wages. This may be explained by all of the following,
except
A. large firms may be more bureaucratic and a less pleasant place to work.
B. large firms are more likely to be unionized.
C. workers at large firms are more highly specialized, requiring more on-the-job training.
D. large firms are more likely to discriminate against women and minorities.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-03 Identify sources of wage differentials arising from differences in job or employer characteristics.
Topic: Wage Differentials: Heterogeneous Jobs
23. The concept of noncompeting groups suggests that workers in different groups
A. are legally prevented from competing with one another.
B. are imperfect substitutes for one another.
C. have comparable characteristics but work for firms in different industries.
D. have identical stocks of human capital but differing preferences for nonwage job characteristics.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-04 Identify sources of wage differentials arising from differences in worker characteristics.
Topic: Wage Differentials: Heterogeneous Workers
25. Compared to present-oriented people, individuals who are more future-oriented tend to have _______
discount rates and consequently tend to obtain _______ education and earnings.
A. lower; more
B. lower; less
C. higher; more
D. higher; less
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-04 Identify sources of wage differentials arising from differences in worker characteristics.
Topic: Wage Differentials: Heterogeneous Workers
26. Consider a worker who faces a trade-off between wages on the vertical axis and job safety on the
horizontal axis.The less averse a worker is to risk of injury on the job, the
A. lower is the wage earned by the worker.
B. steeper arethis worker’s indifference curves.
C. flatter arethis worker’s indifference curves.
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D. lower are the profits of this worker’s employer.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
The shape of the worker’s indifference curves—I1, I2, and I3—indicates that
A. the worker faces a constant trade-off between job safety and wages.
B. for each successive reduction in job safety, greater increases in wages are required to maintain the
same utility.
C. for each successive reduction in job safety, smaller increases in wages are required to maintain the
same level of utility.
D. for each successive reduction in job safety, smaller reductions in wages are required to maintain the
same utility.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
8-9
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The firm’s isoprofit curve, P, is shown as concave to the origin, reflecting the assumption that
A. the firm faces a constant trade-off between job safety and wages.
B. each successive increase in job safety comes at a decreasing expense to the firm.
C. each successive increase in job safety requires a smaller drop in wages to maintain normal profits.
D. each successive increase in job safety comes at an increasing expense to the firm.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
8-10
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of McGraw-Hill Education.
The highest level of utility the worker can possibly achieve is
30. Which of the following is not predicted by the hedonic theory of wages, all else constant?
A. Workers that have strong preferences for particular nonwage amenities will be matched with firms that
can provide them most cheaply.
B. Firms that pay lower wages but offer more amenities have higher than average profits.
C. Jobs that offer high levels of safety will pay less than those in which working conditions are less safe.
D. Firms will tend to offer those nonwage amenities that they can provide most cheaply.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
Consider a worker who faces a trade-off between higher wages and a more relaxed work environment as
shown in the diagram. A worker whose indifference curves are relatively steep
8-11
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A. places a relatively high value on additional informality on the job.
B. will tend to work at a firm with a relatively informal environment, like firm X.
C. will not willingly sacrifice informality for higher wages.
D. does not place a relatively high value on additional informality on the job.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
Which one of the following best explains the differences in the isoprofit curves of the two firms?
8-12
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of McGraw-Hill Education.
C. other things equal, workers who value job safety least will tend to work for firms that have the highest
cost of providing safe jobs.
D. other things equal, workers who value job safety most will tend to work for firms that have the highest
cost of providing safe jobs.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
A. has a stronger taste for job safety relative to income than worker B.
B. has the same taste for job safety relative to income asworker B.
C. has a stronger taste for income relative to job safety than worker B.
D. has a lower skill level than worker B.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
8-13
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of McGraw-Hill Education.
In equilibrium,
A. worker A will work for firm X; worker B will work for firm Y.
B. worker A will work for firm Y; worker B will work for firm X.
C. both workers will work for firm X.
D. both workers will work for firm Y.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 08-05 Explain the hedonic theory of wages.
Topic: The Hedonic Theory of Wages
8-14
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of McGraw-Hill Education.
As a result of the matching between workers and firms, firm X will pay
37. Fringe benefit packages differ substantially from one firm to the next because
A. labor market information is costless.
B. adjustment periods tend to be short.
D. firms may structure their fringe benefit packages to attract specific types of workers.
38. Imperfect and costly labor market information will likely result in
A. wages converging to a common rate.
B. a distribution of wages around the mean for any occupation, independently of compensating
differentials.
C. an inverse relationship between wages and the risk of injury on the job.
D. instantaneous adjustment to equilibrium in response to short-run wage differentials.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-06 Describe the role of labor immobilities and costly or imperfect information in observed wage differentials.
Topic: Wage Differentials: Labor Market Imperfections
8-15
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40. "The high psychic costs of leaving friends and family deter migration in response to wage
differentials."This statement reflects the existence of
A. geographic immobilities.
B. sociological immobilities.
C. institutional immobilities.
D. wage immobilities.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 08-06 Describe the role of labor immobilities and costly or imperfect information in observed wage differentials.
Topic: Wage Differentials: Labor Market Imperfections
8-16
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Difficulty: 2 Medium 15
Difficulty: 3 Hard 7
Learning Objective: 08-
01 Explain the effects if all workers and jobs are homogeneous and all labor markets ar 4
e perfectly competitive.
Learning Objective: 08-
4
02 Describe patterns of wage differentials by industry, occupation, and location.
Learning Objective: 08-
03 Identify sources of wage differentials arising from differences in job or employer ch 15
aracteristics.
Learning Objective: 08-
04 Identify sources of wage differentials arising from differences in worker characteristi 3
cs.
Learning Objective: 08-05 Explain the hedonic theory of wages. 13
Learning Objective: 08-
06 Describe the role of labor immobilities and costly or imperfect information in observ 3
ed wage differentials.
Topic: Perfect Competition: Homogeneous Workers and Jobs 4
Topic: The Hedonic Theory of Wages 13
Topic: The Wage Structure: Overserved Differentials 4
Topic: Wage Differentials: Heterogeneous Jobs 15
Topic: Wage Differentials: Heterogeneous Workers 3
Topic: Wage Differentials: Labor Market Imperfections 3
8-17
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of McGraw-Hill Education.