Firms with Internal Labor Markets Have More Flexibility in Deciding

question 7

Multiple Choice

Firms with internal labor markets have more flexibility in deciding the level and time profile of wages because

• A)individuals tend to base their employment decisions on their entire career earnings.
• B)they have to pay the wage rate that equals the marginal revenue product of labor.
• C)compensating wage differentials do not have to be paid in internal job markets.
• D)firm-specific human capital is less costly than general human capital.

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, affecting the company's liquidity.