Exam 2 answer key - Name[Print TEST VERSION PDQB2 Economics...

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Name [Print]_________________________________ TEST VERSION PDQB2 1 Economics 440: Economics of Labor Markets University of Illinois at Urbana-Champaign Professor Ron Laschever Spring 2010, Exam #2 Answer Key Read the instructions carefully: Write your name at the top of each page . You have one hour and 20 minutes to complete this exam. You will receive 5 points for handing in the exam on time. No extra points if it’s up to five minutes late, and -30 points if it’s more than five minutes late. You may not consult any outside material, such as course notes or books, or communicate with other students, people, objects, or beings from other galaxies, during the exam time. Turn off your cell phone and put it and any books, papers, calculators, etc. under your desk. Write your answers in the space provided on the exam. Speak with one of the exam proctors if you have any procedural questions. You may use the one blank page in the end of the exam as scratch paper, and you must turn it in with the rest of the exam (don’t separate it out). If you are certain a piece of information is missing, and that without it, you can’t even attempt to solve the question, clearly state whatever extra assumption(s) you are using, and then proceed to solve the question. Note that the questions do not (intentionally) have any missing information/assumptions. You will not receive full credit for making an assumption that is not needed, even if your answer is correct. Scoring : The exam is worth a total of 105 points (including on time bonus). The value of each question is indicated below. You must have the correct reasoning to get credit for an answer. Write legibly. You will not receive credit if your answer cannot be understood. Now, take a deep breath, another one, relax, and do well. (Don’t forget to read the instructions and questions carefully! It’s a good use of your time) 0. My ROW NUMBER IS [1 point]: [35 Pts] 1. True/False and short answer questions. For the true/false questions, indicate whether each statement is true or false and support your answer with a brief explanation or a graph as appropriate. Do not answer “maybe” or “it depends” to the true/false questions. If part of a statement is false, the whole thing is false . [Each lettered part is worth 5 points].
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Name [Print]_________________________________ TEST VERSION PDQB2 2 a. True or False: Abe has a higher discount rate than Burt, but they are otherwise identical, so Abes’s optimal level of schooling is less than Burt’s. True. We’ve seen this in class many times. Intuitively, a higher discount rate represents higher costs… b. According to Borjas: “A piece-rate compensation system also overemphasizes the quantity of output produced. In the typical piece-rate system, the worker will want to trade off _________ for quantity”(pp. 459 in the textbook). i. Fill in the blank in the above quote: ______ quality ____________________[1 point] ii. How did Lincoln Electric overcome the aforementioned concern in their piece-rate compensation system? (You must give at least two ways for full credit) [4 pts] 1) Each worker had to stamp their name on the product and was responsible for fixing a defected one at their own expense.
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