Labor Economics Final Exam
Contracts where much of the information is simply understood and not in writing. They are
typically "incomplete" - ANSWhat is an implicit contract?
When accepting a job offer, the employee often has a better idea of how hard he or she is willing
to work than the employer does
The employer generally knows a lot more about the job than the employee does when the
employee first accepts a job offer - ANSWhat are the two parts of information asymmetries?
A wage paid that is consistent with the maximum efficiency of a firm - ANSWhat is an efficiency
wage?
When an efficiency wage is put in place, wages tend to increase as people work harder, quit
rate and termination rate reduce, morale increases, and company profits increase - ANSExplain
the positive effects of the efficiency wage
When wages paid to employees are different for different demographic groups - ANSWhat is
wage discrimination?
Occupations are separated by race, sex, etc. - ANSWhat is occupational discrimination?
The premium that the employer is willing to pay one demographic in order to not hire a different
demographic - ANSWhat is the discrimination coefficient?
In addition to using personal characteristics of applicants, the average characteristics of the
group are factored into the hiring decision even in the absence of personal prejudice - ANSWhat
is statistical discrimination?
There are two types of labor markets (primary and secondary) where primary workers never
want secondary jobs and secondary workers can never get primary jobs. - ANSExplain dual
labor markets
Markets with good jobs that pay well and have stable employment - ANSWhat are primary labor
markets?
Markets with undesirable jobs that do not pay well and have unstable employment - ANSWhat
are secondary labor markets?
Certain groups are kept out of certain occupations and are crowded into other occupations,
reducing the supply of one occupation and raising the wage rate. - ANSWhat is crowding?
, We cannot have equal wages between men and women because men and women are in
different jobs.
We should assign points to each job according to problem-solving skills, levels of accountability,
and physical characteristics of the work.
Jobs assigned higher point values receive higher pay and jobs with equal point values receive
equal pay - ANSWhat is the comparable worth theory?
It gets rid of the market and results in the misallocation of labor - ANSWhat is the problem with
the comparable worth theory?
Workers whoa re unemployed because of the union wait to get a job until they can get a job in
the union sector - ANSWhat is wait unemployment?
Unions restrict the number of unionized workers available to work, causing a decrease in supply
and increase in demand. In response to this, employers often hire more non-unionized workers
who work for less money - ANSWhat is the spillover effect?
Non-union sector is threatened by the union to raise the wage rate to keep the union away -
ANSWhat is the threat effect?
The measure of people who are unemployed because they are in between jobs - ANSWhat is
frictional unemployment?
Arises due to a mismatch between skills demanded and supplied in a given area or across
areas - ANSWhat is structural unemployment?
Unemployment that occurs due to the decline in aggregate demand in the output or when firms
temporarily lay off workers during recessions.
Occurs during times of fluctuation in the business cycle. - ANSWhat is cyclical unemployment?
The difficulty a company experiences in trying to reduce wages due to the labor agreement,
fears for lost productivity, or other reasons. - ANSWhat is wage rigidity?
Occurs when there is a limited need for a specific type of work to be performed during a certain
time of the year - ANSWhat is seasonal unemployment?
The condition in which virtually all who are able and willing to work are employed - ANSWhat is
full employment?
Contracts where much of the information is simply understood and not in writing. They are
typically "incomplete" - ANSWhat is an implicit contract?
When accepting a job offer, the employee often has a better idea of how hard he or she is willing
to work than the employer does
The employer generally knows a lot more about the job than the employee does when the
employee first accepts a job offer - ANSWhat are the two parts of information asymmetries?
A wage paid that is consistent with the maximum efficiency of a firm - ANSWhat is an efficiency
wage?
When an efficiency wage is put in place, wages tend to increase as people work harder, quit
rate and termination rate reduce, morale increases, and company profits increase - ANSExplain
the positive effects of the efficiency wage
When wages paid to employees are different for different demographic groups - ANSWhat is
wage discrimination?
Occupations are separated by race, sex, etc. - ANSWhat is occupational discrimination?
The premium that the employer is willing to pay one demographic in order to not hire a different
demographic - ANSWhat is the discrimination coefficient?
In addition to using personal characteristics of applicants, the average characteristics of the
group are factored into the hiring decision even in the absence of personal prejudice - ANSWhat
is statistical discrimination?
There are two types of labor markets (primary and secondary) where primary workers never
want secondary jobs and secondary workers can never get primary jobs. - ANSExplain dual
labor markets
Markets with good jobs that pay well and have stable employment - ANSWhat are primary labor
markets?
Markets with undesirable jobs that do not pay well and have unstable employment - ANSWhat
are secondary labor markets?
Certain groups are kept out of certain occupations and are crowded into other occupations,
reducing the supply of one occupation and raising the wage rate. - ANSWhat is crowding?
, We cannot have equal wages between men and women because men and women are in
different jobs.
We should assign points to each job according to problem-solving skills, levels of accountability,
and physical characteristics of the work.
Jobs assigned higher point values receive higher pay and jobs with equal point values receive
equal pay - ANSWhat is the comparable worth theory?
It gets rid of the market and results in the misallocation of labor - ANSWhat is the problem with
the comparable worth theory?
Workers whoa re unemployed because of the union wait to get a job until they can get a job in
the union sector - ANSWhat is wait unemployment?
Unions restrict the number of unionized workers available to work, causing a decrease in supply
and increase in demand. In response to this, employers often hire more non-unionized workers
who work for less money - ANSWhat is the spillover effect?
Non-union sector is threatened by the union to raise the wage rate to keep the union away -
ANSWhat is the threat effect?
The measure of people who are unemployed because they are in between jobs - ANSWhat is
frictional unemployment?
Arises due to a mismatch between skills demanded and supplied in a given area or across
areas - ANSWhat is structural unemployment?
Unemployment that occurs due to the decline in aggregate demand in the output or when firms
temporarily lay off workers during recessions.
Occurs during times of fluctuation in the business cycle. - ANSWhat is cyclical unemployment?
The difficulty a company experiences in trying to reduce wages due to the labor agreement,
fears for lost productivity, or other reasons. - ANSWhat is wage rigidity?
Occurs when there is a limited need for a specific type of work to be performed during a certain
time of the year - ANSWhat is seasonal unemployment?
The condition in which virtually all who are able and willing to work are employed - ANSWhat is
full employment?
