Personnel Economics
Question Bank
Course Introduction
Personnel Economics explores the application of economic principles and analytical frameworks to human resource management within organizations. Topics include hiring practices, compensation schemes, performance evaluation, training and development, promotion policies, incentives, and teamwork. The course examines how firms can structure employment practices to align employee interests with organizational goals, improve productivity, and foster a positive workplace culture. Through theoretical models and real-world examples, students learn how economic tools can inform effective management decisions about recruitment, retention, and overall workforce optimization.
Recommended Textbook
Contemporary Labor Economics 10th Edition by Campbell McConnell
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18 Chapters
829 Verified Questions
829 Flashcards
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Chapter 1: Labor Economics: Introduction and Overview
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Sample Questions
Q1) Labor economics is studied as a distinct subfield of economics because:
A)the bulk of national income is received by labor
B)the concepts of supply and demand must be revised somewhat when applied to labor markets
C)labor economics can be used to analyze major socioeconomic trends such as the surge in the number of women workers
D)all of the above
Answer: D
Q2) Nobel Laureate Gary Becker is known for economic theories in all of the following areas except:
A)economics of households
B)investment in human capital
C)the "old" labor economics
D)economics of discrimination
Answer: C
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Chapter 2: The Theory of Individual Labor Supply
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54 Flashcards
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Sample Questions
Q1) Indifference curves are convex to the origin because:
A)at a lower income,a person is more willing to sacrifice income for additional leisure
B)at a lower income,a person is less willing to sacrifice income for additional leisure
C)at any income level,a person is willing to sacrifice the same amount of income for additional leisure
D)the marginal rate of substitution of leisure for income is negative
Answer: B
Q2) Which of the following would unambiguously predict a decrease in desired hours of work?
A)The substitution effect of a wage decrease
B)The income effect of a wage decrease
C)A wage increase
D)The substitution effect of a decline in income tax rates
Answer: A
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4
Chapter 3: Population, Participation Rates, and Hours of Work
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44 Flashcards
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Sample Questions
Q1) Since the mid 1980s,the labor force participation rate of women has _____ and the participation rate of men has _____.
A)risen; been unchanged
B)risen; fallen
C)fallen; risen
D)risen; risen
Answer: B
Q2) Most of the variations in U.S.population growth have resulted from changes in:
A)birthrates and net migration
B)birthrates and death rates
C)net migration and death rates
D)birthrates and technological change
Answer: A
Q3) Which of the following best exemplifies the Becker income effect? An increase in the market wage leads a household to:
A)substitute time for goods in the production of commodities
B)consume fewer time-intensive commodities and more goods-intensive commodities
C)consume more commodities
D)have fewer children
Answer: C
Page 5
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Chapter 4: Labor Quality: Investing in Human Capital
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49 Flashcards
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Sample Questions
Q1) Evidence suggests that,during recessions,the college enrollment rate:
A)rises,because the benefit of attending college rises
B)rises,because the effect of reduced ability to pay is swamped by the effect of lower opportunity costs
C)rises,because the effect of reduced ability to pay is swamped by the effect of increased state funding to counter the recession
D)falls,because the effect of lower opportunity cost is swamped by the effect of reduced ability to pay
Q2) All else equal,investment in education will be greater,the:
A)higher the interest rate
B)greater the direct cost of education
C)lower the expected retirement age
D)greater the earnings differential between more and less educated workers
Q3) If part of the typical college graduates additional earnings is attributable to ability and not to education:
A)the screening hypothesis must be false
B)estimated rates of return will overstate the actual rate of return
C)there will be less dispersion in the distribution of earnings than otherwise
D)the social rate of return will understate the private rate
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Page 6
Chapter 5: The Demand for Labor
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64 Flashcards
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Sample Questions
Q1) Suppose that,as a result of a decrease in the market supply of labor,the wage rate has risen 10%.After adjusting its employment level,a firm finds its total wage bill has decreased.This occurrence indicates that the firm's labor demand:
A)is inelastic over this range of wages
B)is elastic over this range of wages
C)is unit elastic over this range of wages
D)was inelastic at the old wage,but is elastic at the new,higher wage
Q2) Which of the following best describes the substitution effect of a wage increase?
A)The firm's marginal cost increases,the firm desires to produce less output,and therefore less labor is required
B)The cost of labor is relatively higher,causing the firm to use relatively less labor
C)The firm's labor demand curve becomes less elastic,causing it to employ less labor
D)The firm's labor demand curve becomes more elastic,causing it to employ less labor
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Chapter 6: Wage Determination and the Allocation of Labor
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Sample Questions
Q1) At wage rate W<sub>1</sub> there is an:
A)excess supply of labor and the wage rate will fall
B)excess supply of labor and the wage rate will rise
C)excess demand for labor and the wage rate will fall
D)excess demand for labor and the wage rate will rise
Q2) Market labor supply curves are generally:
A)upward sloping,as higher wages attract workers away from their next best alternatives
B)backward-bending,as the substitution effect of higher wages outweighs the income effect
C)vertical at any particular point in time
D)perfectly elastic at the market wage rate
Q3) The table indicates that:
A)the firm sells output in a perfectly competitive market
B)the firm is a monopolist
C)the firm hires labor in a perfectly competitive market
D)the firm is a monopsonist
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Chapter 7: Alternative Pay Schemes and Labor Efficiency
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49 Flashcards
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Sample Questions
Q1) Efficiency wage models are often criticized because:
A)other pay-for-performance plans could serve as a substitute for an efficiency wage
B)employees could be required to post a forfeitable bond instead
C)shirking could be reduced by deferred compensation plans
D)all of the above
Q2) Which one of the following events could not have caused a shift from isoprofit line 1 to line 2?
A)The employer's share of the payroll tax rate has increased and the limits expanded
B)Firms structured fringe benefits so as to increase worker productivity
C)The government began to subject some fringe benefits to the personal income tax
D)Insurance companies offered group discounts for medical and disability coverage
Q3) One implication of efficiency wage models is that:
A)firms pay wages below the market-clearing rate
B)an excess supply of labor may be created
C)an excess demand for labor may be created
D)CEO contracts will contain golden parachute clauses
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Chapter 8: The Wage Structure
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Sample Questions
Q1) The hedonic theory of wages predicts that:
A)workers and firms will be matched randomly,but in equilibrium firms will be maximizing profits and workers will be maximizing utility
B)other things equal,workers who value job safety least will tend to work for firms that have the lowest cost of providing safe jobs
C)other things equal,workers who value job safety least will tend to work for firms that have the highest cost of providing safe jobs
D)other things equal,workers who value job safety most will tend to work for firms that have the highest cost of providing safe jobs
Q2) Average hourly pay for production workers in the U.S.in 2010 was:
A)higher than in most other industrialized countries in Europe and Asia
B)lower than in most other industrialized countries in Europe and Asia
C)about the same as in most other industrialized countries in Europe and Asia
D)lower than in many other industrialized countries in Europe but greater than in newly industrialized countries such as Singapore,Taiwan,and Korea
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10
Chapter 9: Mobility,Migration,and Efficiency
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Sample Questions
Q1) All else equal,a worker is less likely to move:
A)if he or she has moved before
B)the more unionized the worker's occupation
C)the greater the worker's educational attainment
D)if the worker is single
Q2) All else equal,a worker is more likely to move if:
A)his or her spouse is also a labor force participant
B)there are school-age children in the family
C)his or her spouse has accumulated very little job tenure
D)he or she is married
Q3) Approximately what percent of the U.S.population changes residences each year?
A)Less than 5%
B)5% - 10%
C)15% - 20%
D)More than 25%
Q4) All else equal,a worker is less likely to move:
A)if the worker has moved before
B)the greater the amount of specific training the worker has
C)the greater the worker's educational attainment
D)the shorter the distance moved
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Chapter 10: Labor Unions and Collective Bargaining
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Sample Questions
Q1) Which one of the following hypotheses is not generally given as an explanation of the change in relative union membership?
A)managerial-opposition hypothesis
B)union-growth hypothesis
C)structural-change hypothesis
D)substitution hypothesis
Q2) The local union has primary responsibility for:
A)organizing workers in its craft or industry
B)negotiating collective bargaining agreements
C)handling grievance procedures
D)settling jurisdictional disputes
Q3) The level of union organization that is most likely to "organize the unorganized" is the:
A)federation
B)national union
C)state union
D)local union
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Chapter 11: The Economic Impact of Unions
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Sample Questions
Q1) The nonunion wage rate may rise as the result of a union wage increase because of the:
A)spillover effect
B)superior-worker effect
C)threat effect
D)compensating wage differential effect
Q2) The pure union wage advantage in this market is:
A)20%
B)25%
C)$2
D)More information is needed
Q3) If nonunion workers in a given occupation are paid $16 per hour while union workers receive $20 per hour,the pure union wage advantage is:
A)20%
B)25%
C)80%
D)more information is required
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Chapter 12: Government and the Labor Market:
Employment, Expenditures, and Taxation
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Sample Questions
Q1) Empirical studies of public-sector pay conclude that:
A)public-sector pay is comparable to private-sector pay,as required by law
B)the occupational wage structure is less egalitarian than in the private sector
C)the pay premium is greater for highly-skilled workers than for low-skilled workers
D)the pay premium is greater for African Americans and females than for white males
Q2) The public provision of a good that is a substitute for a private good will:
A)likely decrease labor demand in the private sector
B)likely increase labor demand in the private sector
C)necessarily reduce wage rates of government workers
D)necessarily reduce work effort
Q3) For any given individual,an increase in the income tax rate will:
A)increase work effort
B)decrease work effort
C)decrease work effort if the income effect outweighs the substitution effect
D)increase work effort if the income effect outweighs the substitution effect
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Chapter 13: Government and the Labor Market: Legislation and Regulation
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Sample Questions
Q1) Which of the following established unfair labor practices by unions?
A)Norris-LaGuardia Act
B)Taft-Hartley Act
C)Wagner Act
D)Landrum-Griffin Act
Q2) Which of the following established unfair labor practices by employers?
A)Norris-LaGuardia Act
B)Taft-Hartley Act
C)Wagner Act
D)Landrum-Griffin Act
Q3) According to the Taft-Hartley Act,which of the following is not an unfair labor practice by unions?
A)Striking a company over a jurisdictional dispute with another union
B)Striking a company as a means of trying to obtain a collective bargaining agreement with that firm
C)Striking a company to show sympathy for another union in obtaining employer recognition
D)Setting excessive union dues
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Chapter 14: Labor Market Discrimination
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60 Flashcards
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Sample Questions
Q1) Which one of the following non-discriminatory factors may account for lower observed wages for women compared to men?
A)Women have stronger preferences for job safety
B)"Full-time" females actually work more hours than "full-time" males
C)Men expect to change jobs more often than women
D)Men have higher levels of "general" training,while women's training is more "specific"
Q2) The index of segregation for this economy is:
A).20
B).30
C).40
D).70
Q3) The inefficiencies of occupational segregation by gender arise because:
A)women are paid less than their values of marginal product
B)men are paid less than their values of marginal product
C)both women and men are paid less than their values of marginal product
D)women's values of marginal product are less than men's,even though they are equally productive
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Chapter 15: Job Search: External and Internal
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Sample Questions
Q1) The acceptance wage is the wage that:
A)equates the expected marginal benefit and expected marginal cost of continued job search
B)minimizes the expected cost of continued job search
C)maximizes the expected benefit of continued job search
D)equates the expected average benefit and expected average cost of continued job search
Q2) Wage rates are most likely to be set in accordance with administrative rules and procedures in the:
A)secondary labor market
B)internal labor market
C)external labor market
D)orthodox labor market
Q3) Internal labor markets benefit senior employees by:
A)forcing the firm to pay all of the expenses associated with general training
B)providing them with greater freedom through the informal work rules associated with such markets
C)providing them with increased protection from job layoff
D)protecting them from pay cuts when they leave the firm for other jobs
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Page 17
Chapter 16: The Distribution of Personal Earnings
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Sample Questions
Q1) An increase in earnings inequality would be shown by a:
A)shift from line A to line B
B)shift from lime B to line A
C)movement up to the right along line A
D)movement down to the left along line A
Q2) Compared to the private sector,the public sector earnings distribution tends to be:
A)more unequal because government workers tend to be employed in service occupations
B)more unequal because government pay scales are generally higher
C)less unequal because of the relatively large number of management positions in government
D)less unequal because blue-collar employees are generally paid more and white-collar employees are generally paid less than their private-sector counterparts
Q3) The mode of this distribution is:
A)10,000 workers
B)between $20,000 and $30,000
C)between $30,000 and $40,000
D)between $40,000 and $50,000
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18
Chapter 17: Labor Productivity: Wages,Prices,and Employment
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Sample Questions
Q1) Of the following,which country experienced the fastest rate of productivity growth over the period 2000 - 2010?
A)United States
B)Sweden
C)France
D)Germany
Q2) Productivity appears to be:
A)procyclical; firms are reluctant to lay off workers in a recession,so output falls more than employment
B)procyclical; firms are quick to lay off workers in a recession,so employment falls more than output
C)countercyclical; firms are reluctant to lay off workers in a recession,so output falls more than employment
D)countercyclical; firms are quick to lay off workers in a recession,so employment falls more than output
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Chapter 18: Employment and Unemployment
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Sample Questions
Q1) Flow 3 includes all of the following except:
A)discharges
B)layoffs
C)quits
D)retirements
Q2) The full-employment level of output is given by:
A)Q<sub>1</sub>
B)Q<sub>2</sub>
C)Q<sub>3</sub>
D)Q<sub>3</sub> - Q<sub>1</sub>
Q3) Which of the following non-working individuals would be considered officially unemployed by the Bureau of Labor Statistics?
A)John,who is beginning a 3-month vacation before reporting to his new job
B)Ronald,who two months ago gave up his job search in despair because he could not attract a job offer
C)Martha,who has not been on the job for the past four weeks because she broke her leg
D)Hiroshi,who is waiting to be called back to his job from which he was laid off five weeks ago
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