CBE Labor Economics 2

Question 1

Which concept describes the wage premium workers receive for accepting jobs with higher risk of injury or death?

Accepted Answer

Compensating differential

Answer

Efficiency wage

Answer

Monopsony premium

Answer

Reservation wage

Question 2

The labor force participation rate is calculated as the labor force divided by:

Accepted Answer

Working-age population

Answer

Total population

Answer

Number of employed persons

Answer

Number of unemployed persons

Question 3

Under a perfectly competitive labor market, a firm's optimal hiring rule is to employ workers until:

Accepted Answer

Marginal revenue product equals the market wage

Answer

Average product of labor is maximized

Answer

Total labor cost equals total revenue

Answer

Marginal cost of output equals average revenue

Question 4

A decrease in the price of a complement to labor (e.g., machinery that works alongside workers) will most likely:

Accepted Answer

Increase labor demand

Answer

Decrease labor demand

Answer

Have no effect on labor demand

Answer

Reduce the equilibrium wage

Question 5

Which theory of wage determination holds that wages reflect the marginal revenue product of labor in competitive markets?

Accepted Answer

Marginal productivity theory

Answer

Efficiency wage theory

Answer

Bargaining theory

Answer

Segmented labor market theory

Question 6

The reservation wage is best defined as:

Accepted Answer

The wage below which a worker will not accept employment

Answer

The minimum wage set by law

Answer

The average wage in an industry

Answer

The wage at which labor supply is perfectly elastic

Question 7

If the own-wage elasticity of labor demand is −0.4, a 10% increase in wages will reduce employment by approximately:

Accepted Answer

4%

Answer

0.4%

Answer

10%

Answer

40%