Reference no: EM13182170

1)Which one of the following is not a valid explanation for why workers may prefer an extra dollar's worth of fringe benefits to an extra dollar's worth of cash?

a. workers may prefer to bind themselves against their own tendencies toward immediate gratification.

b. certain fringe benefits effectively trade current taxes for future taxes.

c. people generally prefer in-kind benefits to cash.

d. certain fringe benefits are untaxed.

2)The shape of the indifference curves reflects:

a. a diminishing marginal rate of substitution of fringe benefits for wages.

b. increased utility as fringe benefits are substituted for wages along an indifference curve.
c. increased utility as wages are substituted for fringe benefits along an indifference curve.

d. an increasing marginal rate of substitution of fringe benefits for wages

3)Given isoprofit line 1, this worker's wage-fringe optimum is given by point:

a. A

b. B

c. C

d. D

4) Suppose some development rotates the isoprofit line outward, to line 2. If history is a guide, we would expect this worker's new wage-fringe optimum to be at point:

a. D

b. E

c. F

d. G

5)Which one of the following events could not have caused a shift from isoprofit line 1 to line 2?

a. The employers 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.