Question

12. Ceteris paribus, a typical worker’s level of utility
a. Increases with increasing level of effort
b. Increases when her wage and effort increases proportionately such that she is
able to move up within the same indifference curve
c. Decreases when her wage level is constant, but she has to increase her level of
effort.
d. Increases when her wage level remains constant, but she is able to increase her
level of effort.
i) In an internal labor market
a. Labor is traded like a commodity on the stock market
b. Employer type does not matter
c. Employee type does not matter
d. Discrimination may exist
ii) All of the following are true about the difficulties of implementing performance pay
except:
a. Output is not easily observed
b. Hiring is costly
c. Performance may be costly to measure
d. All are correct
iii) In an internal labor market who or what determines wages?
a. Employer wage schemes
b. Employee wage schemes
c. The market
d. All of the above

Answer 1

Ans:12 b. Increases when her wage and effort increases proportionately such that she is
able to move up within the same indifference curve

Reason: with increased wage, the budget line move right and the consumer is able to move up.

Ans:13 a. Labor is traded like a commodity on the stock market

Reason: in the interenal labor market, equilibrium quantity and wages depend upon the demand and supply of the labor.

Ans:14 d. All are correct

Ans:15 d. All of the above