2. 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:
the wage at Ajax will be higher than at Acme
the wage at Ajax will be lower than at Acme
workers will have lower net utility at Acme
employment will be lower at Ajax if demand is the same in both markets

3. The wage rate paid workers at Flow, Inc
The wage rate paid workers at Flow, Inc. will most likely exceed that at otherwise identical Stock Co. if:
Flow, Inc. is a more prestigious firm than Stock Co
earnings are subject to greater variability at Stock, Co.
Stock Co. offers better pension and insurance benefits than Flow, Inc.
the demand for labor at Stock Co. exceeds the demand for labor at Flow, Inc.

4. Which of the following would tend to increase labor supply to a particular job?
The employer cuts back the scope and coverage of the medical plan
Vesting in the firm’s pension plan is pushed back from 1 year to 5 years
The crime rate rises in the city where the job is located
The perceived status of the job improves

5. Suppose this labor market is competitive, so that the wage rate is W2
Suppose this labor market is competitive, so that the wage rate is W2. If W* is imposed as the minimum wage, then employment in this market:
will rise
will fall
remain the same
may or may not change; more info is required
Labor $
MRP S
MWC W* W2 W1 Q1 Q3 Q4 Q2

6. Suppose this labor market is monopsonistic, so that the wage rate is W1. If W* is imposed as the minimum wage, then employment in this market:
will rise
will fall
remain the same
may or may not change; more info is required
Labor $
MRP S
MWC W* W2 W1 Q1 Q3 Q4 Q2

7. Consider a proposed law to deregulate the hair-care industry
Consider a proposed law to deregulate the hair-care industry. Barbers would be allowed to do work previously confined to stylists, and the latter would no longer be required to pass strict licensure exams. Which outcome would you expect to result from this deregulation?
A decrease in economic rent to current stylists
A decrease in economic rent to current barbers
An increase in economic rent to beauty school operators
An increase in economic rent to workers in occupations in which displaced stylists find jobs

8. make all workers better off
Currently, the minimum wage law does not apply to about 12% of non-supervisory workers. Assuming that all consequently displaced workers find jobs in the uncovered sector, an increase in the minimum wage will:
make all workers better off
cause a migration of workers from the uncovered to the covered sector
create additional output in the uncovered sector of a lower value than the output lost in the covered sector
cause an increase in economic rent to original workers in the uncovered sector

9. The profit-maximizing level of job safety is a probability level of:
0.65
0.75
0.80
0.85
0.95
Prob(Safety)
MBs
MCs
.65 25 8
.70 22 10
.75 19 12
.80 18 13
.85 15 14
.90 16
.95 7 20

10. If workers underestimate the actual amount of risk associated with the job because of imperfect information, the values in the:
MBs column will understate the true marginal benefit and the profit-maximizing level of job safety will be less than the optimal level
MBs column will overstate the true marginal benefit and profit-maximizing level of job safety will exceed the optimal level
MCs column will overstate the true marginal cost and the profit-maximizing level of job safety will exceed the optimal level
MCs column will understate the true marginal cost and the profit-maximizing level of job safety will exceed the optimal level

11. If OSHA were to become increasingly effective in reducing workplace hazards, then
firms’ profits would be increased
wage differentials between safe and hazardous jobs would diminish
wage differentials between safe and hazardous jobs would increase
employment in safe jobs would increase and employment in hazardous jobs would decrease

12. The major cost of continued job search is:
the cost of placing job-wanted advertisements in the newspaper
expenses paid to a job-placement agency
foregone wages of job offers not accepted
transportation expenses of going to job interviews

13. If $8.50 is the acceptance wage, what is the probability of Sally finding her next wage offer acceptable?
0.25
0.30
0.50
0.70

14. If the rate of inflation increases but Sally mistakenly believes it has not, then:
both the acceptance wage and the entire distribution will shift to the left, thereby leaving expected search duration unchanged
the entire distribution will shift to the right, but the acceptance wage will not, thereby reducing expected search duration
the acceptance wage will shift to the right, thereby reducing excepted search duration
both the acceptance wage and the entire distribution will shift to the right, thereby leaving expected search duration unchanged

15. A fully anticipated reduction in the rate of inflation is expected to:
reduce the unemployment rate in the short run, but not in the long run
reduce the unemployment rate in the both the short run and the long run
increase the unemployment rate in the short run, but not in the long run
have little impact on the unemployment rate in either the short run or the long run

16. In addition to their regular unemployment benefits, a recent Washington state program offered an average of $562 to any job loser who became reemployed within 13 weeks of filing for unemployment compensation. Economic theory suggests that such a “bounty” scheme should:
reduce job search duration by shifting the wage offer distribution to the left
reduce job search duration by decreasing the acceptance wage and intensifying job search
reduce job search duration by shifting the wage offer distribution to the right
have no effect on job search duration, as the acceptance wage will decrease to offset the effect of the shifting wage offer distribution

17. Which of the following contributes to a higher unemployment rate of African American youths compared to white youths?
Both wage offer distributions and acceptance wages are lower for African American youths
The African American wage offer distribution is to the right of the white distribution
White youths have a higher acceptance wage than African American youths
African American youths have a higher acceptance wage than white youths

18. Which of the following is not a characteristic of an internal labor market?
A port of entry, at which workers gain access to the bottom of the job ladder
A hierarchy of jobs constituting the job ladder
A set of rules and procedures governing the wage structure
Equal access by internal and external workers to jobs at all skill levels

19. Internal labor markets are more likely to occur when
principal-agent problems are absent
workers at a particular firm require specific training
workers at a particular firm require general training
firms expect a high rate of turnover and low hiring costs

20. Suppose a management team assigns 100 points to the job of clerk/typist and 75 points to a job on the loading dock. If the wage paid to a clerk/typist is $8.00 per hour, then the hourly wage paid to a worker on the loading dock would be: $6 $8
$10
$12

21. the probability of job loss rises in B earnings are more variable in A
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:
the probability of job loss rises in B
earnings are more variable in A
job safety improves in A
there are better prospects for advancement in A