MEcon Master of Economics Labor Economics and Human Capital

Question 1

Human capital theory, associated with Gary Becker, views investment in education as:

Accepted Answer

An investment that raises productivity and lifetime earnings

Answer

A consumption good with no return

Answer

A government expenditure that crowds out private investment

Answer

A signal to employers with no productivity effect

Question 2

Signaling theory (Spence) argues that education's primary labor market role may be to:

Accepted Answer

Signal innate ability to employers who cannot observe it directly

Answer

Raise worker productivity directly

Answer

Reduce income inequality through skill formation

Answer

Increase the supply of skilled workers

Question 3

The compensating wage differential theory predicts that jobs with higher risk or less desirable conditions will pay:

Accepted Answer

Higher wages to compensate workers for undesirable attributes

Answer

Lower wages because workers accept any job

Answer

The same as identical safer jobs

Answer

Wages set by union contracts irrespective of conditions

Question 4

The natural rate of unemployment includes:

Accepted Answer

Frictional and structural unemployment but not cyclical unemployment

Answer

Only cyclical unemployment

Answer

All forms of unemployment at a given time

Answer

Zero unemployment in a perfectly efficient economy

Question 5

Monopsony in labor markets results in:

Accepted Answer

Wages below the competitive level and employment below the efficient level

Answer

Wages above the competitive level and efficient employment

Answer

Wages equal to marginal product and optimal output

Answer

Higher wages due to employer competition for workers

Question 6

Efficiency wage theory proposes that paying wages above the market-clearing level:

Accepted Answer

Raises worker productivity and reduces turnover, justifying the cost

Answer

Is always irrational for firms

Answer

Creates unemployment deliberately

Answer

Is only effective in unionized workplaces