CBE Labor Economics 2

Question 1

Which concept describes the wage premium workers receive for accepting jobs with higher risk of injury or death?

Accepted Answer

Compensating differential

Answer

Compensating differentials are wage premiums that offset undesirable job characteristics such as physical danger.

Question 2

The labor force participation rate is calculated as the labor force divided by:

Accepted Answer

Working-age population

Answer

The LFPR equals the labor force (employed + actively seeking work) divided by the civilian noninstitutional population aged 16+.

Question 3

Under a perfectly competitive labor market, a firm's optimal hiring rule is to employ workers until:

Accepted Answer

Marginal revenue product equals the market wage

Answer

Profit maximization requires hiring until MRP = W, because any additional worker beyond this point costs more than they produce.

Question 4

A decrease in the price of a complement to labor (e.g., machinery that works alongside workers) will most likely:

Accepted Answer

Increase labor demand

Answer

Cheaper complementary inputs raise labor's marginal productivity, shifting the labor demand curve rightward.

Question 5

Which theory of wage determination holds that wages reflect the marginal revenue product of labor in competitive markets?

Accepted Answer

Marginal productivity theory

Answer

Marginal productivity theory states that in competitive equilibrium wages equal the value of the marginal product of labor.

(CBE) Certified Business Economist Practice Test