Question 1

Compensation where the top performer receives much higher rewards than other competitors, even if the others perform at only slightly lower levels, is called

Accepted Answer

Tournament pay is a compensation structure where the top performer receives significantly higher rewards than others, even if the performance difference is minimal.

Question 2

Everything else equal, wages are likely to be higher when

Accepted Answer

Higher wages are often associated with jobs that require more skill, as these positions typically demand specialized knowledge or expertise, which is compensated with higher pay.

Question 3

Which of the following is most likely to reduce the market wage rate in a job category?

Accepted Answer

Flexible work hours are often seen as a desirable job feature, which can attract more workers to the job category, potentially reducing the market wage rate due to increased supply of labor.

Question 4

A compensation structure that generates much higher pay rates for the top performers, while those whose productivity is only a little lower receive substantially less compensation, is called

Accepted Answer

Tournament pay is a compensation structure where top performers receive significantly higher pay, similar to winning a tournament, while those with slightly lower performance receive much less.

Question 5

Other things the same, the wages in an occupation are likely to be higher the more

Accepted Answer

The more dangerous the job, the higher the wages are likely to be, as workers demand compensation for the risk they are taking.

Question 6

Other things constant, when the work opportunities in an occupation are unstable (that is, layoffs are common), the hourly wages of workers in the occupation will tend to be

Accepted Answer

When work opportunities are unstable, workers require a wage premium to compensate for the risk of layoffs, leading to higher wages compared to similar jobs with stable opportunities.

Question 7

Which of the following is most likely to increase the market wage rate in a job category?

Accepted Answer

Frequent relocation requirements can make a job less attractive, leading employers to offer higher wages to attract and retain employees.

Question 8

Which one of the following is most likely to reduce the mobility of labor between jobs?

Accepted Answer

An increase in the minimum wage can reduce labor mobility by making it less attractive for workers to move to jobs that pay less than the new minimum wage, even if those jobs offer better long-term opportunities or fit their skills better.

Question 9

Two workers are employed in the same job by the same firm; however, they are paid different wage rates. This could be explained by differences in

Accepted Answer

Differences in wage rates can be explained by differences in their marginal products, which can result from variations in their abilities or skills.

Question 10

If Congress suddenly passes legislation that required all U.S. workers to receive the same annual pay, we would expect

Accepted Answer

If all workers receive the same pay, there would be less incentive to invest in human capital, leading to less human capital investment. Additionally, undesirable jobs would be harder to fill, causing a shortage, while desirable jobs would attract more workers, leading to a surplus.

Question 11

The tournament pay explanation is useful in an attempt to explain why

Accepted Answer

The tournament pay explanation suggests that top executives earn high salaries not just based on their marginal revenue product, but also as a reward for winning a competitive "tournament" among peers, incentivizing lower-level employees to work harder for the chance of reaching those top positions.

Question 12

Which of the following would be most likely to cause an increase in the wage rate for a particular job?

Accepted Answer

An increase in the danger of a job typically requires higher wages to attract workers willing to take on the additional risk.

Question 13

Window cleaners that work the top floors of high-rise office buildings are, on average, paid approximately 30 percent more an hour than those that clean windows on the bottom floor. This is an example of

Accepted Answer

Compensating wage differentials refer to higher wages paid to workers to compensate for the undesirable aspects of a job, such as increased risk or difficulty, which is the case for window cleaners working on higher floors.

Question 14

In an environment of tournament pay, it is quite likely that marginally more productive employees will receive

Accepted Answer

In a tournament pay structure, rewards are based on relative performance rather than absolute productivity. This means that more productive employees can earn more than their marginal revenue product because they win the "tournament," while less productive employees earn less because they do not win.

Question 15

Working conditions, prestige, variety, location, employee freedom, and employee responsibilities are all examples of

Accepted Answer

Non-pecuniary job characteristics refer to aspects of a job that are not related to salary or financial compensation, such as working conditions, prestige, variety, location, employee freedom, and responsibilities.

Question 16

Economic models suggest that movie stars have salaries that

Accepted Answer

Economic models suggest that movie stars' salaries are about equal to their marginal revenue products, meaning their pay reflects the additional revenue they generate for the studio.

Question 17

An example of a non-pecuniary job characteristic is

Accepted Answer

A non-pecuniary job characteristic refers to aspects of a job that are not related to monetary compensation, such as a comfortable work environment.

Question 18

Test pilots are paid high wages by airplane makers primarily because

Accepted Answer

Test pilots are paid high wages because the job requires specialized skills that few people have, and it involves significant risks, making it less attractive to many potential workers.

Question 19

Economic studies have generally found that professional sports players have salaries that

Accepted Answer

Economic studies often find that professional sports players' salaries are approximately equal to their marginal revenue products, as teams are willing to pay players based on the revenue they generate.

Question 20

If carpentry positions A and B required identical skill levels, other things constant, which one of the following would most likely increase the wage rate of position A relative to position B?

Accepted Answer

The intense heat of the sun in position A makes it less desirable, so higher wages would be needed to attract workers compared to the more comfortable air-conditioned position B.

Quiz 13: Earnings, Productivity, and the Job Market