Chapter 10 Self-test questions

'Signalling' in economics is a process:

by which firms select the sort of workers they want.

by which potential employees indicate what sort of workers they are.

by which the firm's head office communicates with its branches and warehouses.

by which railway accidents are avoided.

In a labour market with competitive supply, the equilibrium level of employment will be:

lower with a discriminating monopsonist than with a non-discriminating monopsonist.

the same with both a discriminating monopsonist and a non-discriminating monopsonist.

higher with a discriminating monopsonist than with a non-discriminating monopsonist.

above the labour supply curve.

An internal labour market consists of:

a firm and its employees.

an industry and the people who work in it.

a firm and its long-term employees.

the long-term employees of a firm.

Which of the following is not a reason why internal labour markets may be more efficient than linking an employee's pay to his or her individual performance?

The need for extensive on-the-job learning.

The desire of firms to attract and keep good workers.

The need for long-term planning by senior staff.

The fact that it may be difficult to measure the marginal productivities of new employees accurately.

Which of the following is not an advantage of a tournament structure of rewards within a firm?

There is no need for management decisions about promotion.

Determining promotions needs only limited information.

Pay negotiation with individual workers is avoided.

Problems of asymmetric information within the firm are reduced.

Moral hazard refers to:

the risk of going to hell if you commit a sin.

the tendency to take less care against theft if you are insured against it.

the tendency to lie to an insurance company to get a better policy.

the problems insurance companies have in deciding whom to insure.

Adverse selection refers to:

the tendency of insurance companies to attract the worst risks.

the way consumers do not always behave as rational utility-maximizers.

the fact that statistically most people back the wrong horse in a race.

none of the above.

In the long run, decisions to acquire human capital will:

reinforce disequilibrium differentials in income.

have no impact on disequilibrium differentials in income.

erode disequilibrium differentials in income.

be made by individuals and not be affected by market signals.

A discriminating monopsonist will hire ____________ labour and earn ____________ profits than a monopsonist who must pay the same wage to everyone will.

less, less

less, more

more, less

more, more

Firms' efforts to retain employees who have acquired firm-specific human capital while working for them will tend to lead to wage structures which:

pay a wage equal to marginal product throughout the worker's employment.

pay a wage above marginal product in the early years to encourage the worker to stay with the firm and acquire training.

pay a wage below marginal product in the early years and above marginal product in later years.

are not related to marginal product.

The two main ways in which human capital is acquired are:

inherited genes and formal education.

inherited genes and on-the-job training.

formal education and on-the-job training.

inherited genes and informal education.

The benefits to an individual of acquiring further formal education beyond the statutory minimum level, which will increase their earnings when they do eventually start work, will:

not be affected by their intertemporal discount rate.

be greater if their intertemporal discount rate is higher.

be greater if their intertemporal discount rate is lower.

be independent of what form that further education takes.

Which of the following is not a cause of the pay gap between men and women in the UK?

Workplace segregation.

Occupational segregation.

Longer life expectancy for women.

Human capital differences.

On-the-job training creates capital that is:

always firm-specific.

always transferable.

sometimes firm-specific and sometimes transferable.

embodied in the firm itself.

Monopsony results in a ____________ level of employment and a ____________ wage rate than when labour is purchased competitively.

higher, higher

higher, lower

lower, higher

lower, lower

Quiz Content