Chapter 5 Problems Flashcards
The best definition of quasi-fixed costs is
a. nonwage labor costs.
b. hiring and training costs.
c. costs that vary with the number of workers employed.
d. costs that vary with the number of workers employed, but not with the number of hours worked by existing employees.
D
Which of the following is not a quasi-fixed cost?
a. The hourly wage the firm pays.
b. Costs associated with a defined benefit pension.
c. Costs associated with a defined contribution pension.
d. Employer contributions to Social Security.
A
Suppose that during the training period, a firm spends in real terms 3,000 per trainee on labor and materials for its training program. Trainees in the program each produce 2,000 in output during the
period, but could produce 3,500 if not occupied with training activities. What is the total cost of training per worker to the firm?
a. 1,000.
b. 1,500.
c. 4,500.
d. 6,500.
C
The marginal expense an employer faces when increasing its average workweek by an hour (MEH) is approximately the sum of wage and variable benefit costs (on a per-hour basis) multiplied by the number of employees. Assuming no overtime wage premium, an approximate value for MEH
would be
a. 11.25.
b. 60.
c. 5,625.
d. 30,000.
C
Increasing the overtime pay premium to double time may not result in overtime hours being converted to additional employment because
a. firms may shift to more capital-intensive production methods.
b. the optimal output of many firms is likely to be less.
c. the unemployed may not be substitutes in production for those currently working overtime.
d. all of the above.
D
A law that would mandate full health insurance coverage for all employees.
Assume that currently most, but not all, full-time employees have health insurance coverage, but that few part-time employees are covered.
Holding output and capital constant, what effect would there be on the firm’s mix of part-time and full-time workers?
a. Full-time workers would increase and part-time workers would decrease since the marginal cost of part-time workers is now higher.
b. Full-time workers would decrease and part-time workers would decrease since the marginal cost of part-time workers is now higher.
c. There would be no change in the mix of part-time and full-time workers since part-time workers are still cheaper than full-time workers.
d. Part-time employment would actually increase since more people would now want to work part-time.
A
When a firm provides specific training, what happens to the gap between the post-training wage and the marginal product as the market interest rate decreases?
a. It increases.
b. It decreases.
c. It stays the same.
d. It persists for a longer period of time.
B
Workers want the firm to pay some of the initial cost of specific training because
a. this will create a gap between the marginal product and the post-training wage.
b. workers will have some protection from layoffs due to declining demand.
c. the present value of the total compensation package will be higher.
d. both a and b.
D
Firms want the workers to pay some of the initial cost of specific training because
a. the firm will recover more of its investment in the workers.
b. the post-training wage will be farther above the workers’ marginal product in other firms.
c. workers will be less likely to quit the firm.
d. both b and c.
D
Specifically trained workers will be predisposed to quit the firm when
a. the post-training wage is less than their marginal product at the firm.
b. the firm employs statistical discrimination.
c. the present value of the entire compensation scheme is not equivalent to what can be earned
elsewhere.
d. the firm utilizes an internal labor market strategy.
C
Firms faced with high hiring and training costs may
a. pay workers substantially less than their marginal product while they are in training.
b. use statistical discrimination in hiring.
c. use internal labor markets.
d. all of the above
D
In a labor market that is monopsonistic
a. firms pay a competitive wage.
b. firms face an upward-sloping supply of labor curve.
c. are monopolists in output markets.
d. all of the above.
B
When mobility costs are high
a. the supply of labor is more elastic.
b. the supply of labor is less elastic.
c. the supply of labor is perfectly elastic.
d. the elasticity of supply of labor can no longer be determined.
B
In a monopsonistic labor market where everyone is covered by the minimum wage, it is possiblefor the minimum wage to lead to
a. higher employment.
b. lower employment.
c. no change in employment.
d. all of the above.
D
