Read the two statements below and then choose the answer which is incorrect.

(a) The government should increase the minimum wage every year to keep up with inflation.

(b) The percentage of women in the workforce has considerably increased over the last century.

Choose one answer.

	A. Statement (a) is an example of a positive economic analysis.
	B. Statement (b) is an example of a positive economic analysis.
	C. Both statements (a) and (b) relate to positive economic analysis.
	D. Both statements (a) and (b) relate to normative economic analysis.

Question 2

Which of the following factors does not lead to market failure?

Choose one answer.

	A. Price distortions
	B. Public goods
	C. Transaction barriers
	D. Perfect information

Question 3

Given the following data, calculate the unemployment rate.

population	50 million
number unemployed	5 million
out of labor force	20 million

Choose one answer.

	A. 25%
	B. 50%
	C. 16.67%
	D. 10%

Question 4

All of the following indicate some form of measurement error while compiling labor force statistics, EXCEPT:

Choose one answer.

	A. Some people refuse to respond to surveys.
	B. Details about previous employment or previous year may be reported incorrectly.
	C. The government refuses to reveal information.
	D. Some respondents may intentionally underreport their wages for fear of being reported to the Internal Revenue Service.

Question 5

Given the following data, calculate the labor force participation rate.

Population	50 million
Number of unemployed	5 million
Out of labor force	20 million

Choose one answer.

	A. 10%
	B. 60%
	C. 40%
	D. 50%

Question 6

A worker is paid a nominal wage of $20/hour in 2008 which increased to $25/hour in 2009. Inflation increased 4% between 2008 and 2009. If 2008 is considered the base year, normalize the base year price as 100, and using the price deflator, calculate the worker's real wage in 2009 (in 2008 dollars).

Choose one answer.

	A. $24.04
	B. $25
	C. $23.28
	D. $20

Question 7

Consider a typical downward sloping labor demand curve with wages on the vertical axis and quantity of labor demanded on the horizontal axis. If the demand for computers increases, then which of the following occurs?

Choose one answer.

	A. The demand for workers in the production of computers would increase, shifting the labor demand curve inwards (to the left of its original position).
	B. The demand for workers in the production of computers would increase, shifting the labor demand curve outwards (to the left of its original position).
	C. The quantity of labor demanded in the computer factories increases, and there is movement along the labor demand curve.
	D. The prices of computers fall, leading to a shift in the labor demand curve.

Question 8

A landlord is willing to rent out his property at a minimum price of $600 per month. If the landlord manages to find a tenant who pays him a monthly rent of $1000 per month, what is the landlord's extra income referred to as?

Choose one answer.

	A. Reservation wage
	B. Transfer payment
	C. Fringe benefits
	D. Economic rent

Question 9

Which of the following statements are true?

I. If there is a wage increase, a worker feels better off and may reduce the number of hours worked. This is known as the income effect.

II. If there is a wage increase, the opportunity cost of leisure increases, and as a result, a worker may increase the number of hours worked. This is known as the substitution effect.

Choose one answer.

	A. Only I is true.
	B. Only II is true.
	C. Both I and II are true.
	D. Neither I nor II is true.

Question 10

Assuming that leisure is a normal good, an increase in wage will cause the quantity of labor supplied to do which of the following?

Choose one answer.

	A. Increase, provided the substitution effect outweighs the income effect
	B. Increase, provided the income effect outweighs the substitution effect
	C. Increase, depending on the employer
	D. Increase, if the individual has no vacation time

Question 11

Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) as in the simple neoclassical model of labor supply: U=U(Y,L). Which of the following best characterizes an indifference curve that represents the various combinations of Y and L for a given level of utility?

Choose one answer.

	A. Downward sloping because an individual would be willing to give up some utility for more leisure, and vice versa
	B. Downward sloping because an individual would be willing to give up some utility for more income, and vice versa
	C. Downward sloping because an individual would be willing to give up some income for more leisure, and vice versa
	D. Upward sloping because an individual would be willing to give up some income for more leisure, and vice versa

Question 12

Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) as in the simple neoclassical model of labor supply and is given by the function: U=3YL^1/3. The marginal utility of leisure is given by which of the following?

Choose one answer.

	A. YL^-1/3
	B. YL^-2/3
	C. YL^1/3
	D. YL^2/3

Question 13

Assume that an individual's utility level(U) is a function of two goods: real income and leisure time (L) as in the simple neoclassical model of labor supply and is given by the function: U=3YL^1/3. The marginal utility of income is given by which of the following?

Choose one answer.

	A. 3L^1/3
	B. 3L^2/3
	C. YL^-2/3
	D. 3Y

Question 14

Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) as in the simple neoclassical model of labor supply and is given by the function: U=3YL^1/3. The marginal rate of substitution (MRS) is given by which of the following?

Choose one answer.

	A. Y/3L^2/3
	B. Y/3
	C. Y/3L
	D. L/3Y

Question 15

Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) and is given by the function: U = 3YL^1/3 . The budget constraint is given by V + w(T-L) = pY, where T=time available for work, w = wage rate, and p=the price index for real income and V=non-labor income. If V = 0, w = 1, T = 12, and p = 2, what is the utility maximizing choice of leisure hours?

Choose one answer.

	A. 6
	B. 3
	C. 8
	D. 9

Question 16

While calculating the labor supply elasticity with respect to wages, a perfectly inelastic labor supply implies which of the following?

Choose one answer.

	A. If there is an x% change in the wage rate, there is an equal percentage change in the labor supply.
	B. If there is an x% change in the wage rate, labor supply changes by less than x%.
	C. If there is an x% change in the wage rate, labor supply changes by more than x%.
	D. Changes in wage rates do not affect labor supply.

Question 17

John works at the library and is paid at an hourly rate. While his pay from work remains unchanged, he recently won a big lottery. This sudden increase in non-labor income is likely to lead to which of the following?

Choose one answer.

	A. A decrease in labor supply because of the income effect
	B. A decrease in labor supply because of the substitution effect
	C. An increase in labor supply because of the income effect
	D. An increase in labor supply because of the substitution effect

Question 18

The backward bending portion of a labor supply curve indicates which of the following?

Choose one answer.

	A. The substitution effect of a wage change outweighs the income effect.
	B. The income effect of a wage change outweighs the substitution effect.
	C. The elasticity of labor supply with respect to wages is infinite.
	D. The elasticity of labor supply with respect to wages is perfectly infinite.

Question 19

Which of the following best describes the discouraged worker effect?

Choose one answer.

	A. Reduction in labor force participation as unemployment rises
	B. Increase in labor force participation as unemployment rises
	C. Reduction in labor force participation as unemployment falls
	D. Increase in labor force participation as unemployment falls

Question 20

Fill in the blank. Labor demand for a profit maximizing firm in a perfectly competitive labor market is given by __________________.

Choose one answer.

	A. The average revenue product of labor
	B. The marginal revenue product of labor
	C. The average factor cost of labor
	D. The marginal factor cost of labor

Question 21

Unit elastic labor demand implies that if wages increase by x%, then which of the following occurs?

Choose one answer.

	A. Labor demand increases by exactly x%.
	B. Labor demand decreases by exactly x%.
	C. Labor demand increases by 1%.
	D. Labor demand decreases by 1%.

Question 22

Suppose Firm A faces a reduction in the wages of its employees. Capital and output prices for the firm remain unchanged. The decrease in wage rate affects labor demand in which of the following ways?

I. The reduced cost of production induces the firm to increase output and hire more labor.

II. The firm's profit will increase due to the reduction in the cost of production and the demand for labor will remain unchanged.

Choose one answer.

	A. I is correct.
	B. II is correct.
	C. Both I and II are correct.
	D. Neither I nor II is correct.

Question 23

A monopsony firm hires 20 workers and pays a wage of $10.00 an hour to each worker. Because of an increase in the demand for its product, the firm must hire two additional workers. However, to induce these two workers, the firm increases its wage to $11/hour for all the workers. What is the marginal factor cost of adding these two workers?

Choose one answer.

	A. $22
	B. $24.20
	C. $42
	D. $1

Question 24

Consider the graph below. The labor demand curves D and D' show the maximum amount that firms are willing to pay to hire any given number of workers. D shows the original demand for labor. After a payroll tax is introduced by the government, the curve shifts to D'. In this situation, which of the following is true?

Choose one answer.

	A. The employees bear the burden of the tax.
	B. The employers bear the burden of the tax.
	C. Both employers and employees share the burden of the tax.
	D. The one who bears the burden of the tax is dictated by the government.

Question 25

Suppose the optimal labor demand function is given by the following equation.

L*= p³ / 8r ^1/2 w

If p = 200, r = 25, and w = 4, calculate the elasticity of demand with respect to wages.

Choose one answer.

	A. 1
	B. -1.5
	C. 0.25
	D. -0.25

Question 26

Suppose the absolute wage elasticity of labor demand is 0.5. If there is a wage increase of 10%, then which of the following will occur?

Choose one answer.

	A. Employment will increase by 5%.
	B. Employment will decrease by 5%.
	C. Employment will increase by 10%.
	D. Employment will decrease by 10%.

Question 27

Which of the following statements about the wage paid by a monopsonist is true?

Choose one answer.

	A. It is the same as the wage paid in a competitive labor market.
	B. It is higher than the wage paid in a competitive labor market.
	C. It is less than the wage paid in a competitive labor market.
	D. It is determined by labor unions.

Question 28

According to the Hicks-Marshall laws of derived demand, own-wage elasticity of labor demand will be relatively low when which of the following occurs?

Choose one answer.

	A. The price elasticity of demand for the final product is relatively low.
	B. It is relatively easy to substitute other factors for this category of labor.
	C. The supply of other factors of production is relatively elastic.
	D. This category of labor accounts for a relatively large share of total costs.

Question 29

Consider the following situation, sketch a supply and demand graph, and answer the question. Assume a competitive labor market was initially at equilibrium. The government then imposes a minimum wage that is above the market clearing level. Which of the following best represents what occurs with the new minimum wage?

Choose one answer.

	A. There is a shortage of workers.
	B. There is a surplus of workers.
	C. There is no change in the equilibrium number of workers demanded.
	D. There is no change in the equilibrium number of workers supplied.

Question 30

Assume there are no labor market frictions. If the equilibrium wage rate in country A is greater than the equilibrium wage rate in country B, then which of the following is most likely to occur?

Choose one answer.

	A. Workers from country B would move to higher wage country A, while the firms would stay put in their respective countries.
	B. Firms from country A would move to lower wage country B, while the workers would stay put in their respective countries
	C. Workers from country B would move to higher wage country A, while the firms from country A would move to lower wage country B, resulting in an arbitrage.
	D. Policy makers would make sure the wage is equalized in both countries to avoid immigration and outsourcing.

Question 31

All of the following are examples of labor market frictions, EXCEPT:

Choose one answer.

	A. Cost of human capital investments.
	B. Input costs.
	C. Search costs.
	D. Mobility costs.

Question 32

Choose the best answer to fill in the blanks. If the National Football League is the only employer of professional football players in America, it represents a case of ________________ in the __________________ market.

Choose one answer.

	A. Monopsony, labor
	B. Monopoly, labor
	C. Monopsony, goods
	D. Monopoly, goods

Question 33

Given the following information, at what point does a profit maximizing monopsonist stop hiring additional workers?

Number of workers	Value of Marginal Product of Labor (VMPL=P*MPL)	Marginal Revenue Product of Labor (MRPL=MR*MPL)	Marginal Cost
1	25	25	20
2	35	35	30
3	40	42	40
4	45	50	50

Choose one answer.

	A. When the number of workers is 1
	B. When the number of workers is 2
	C. When the number of workers is 3
	D. When the number of workers is 4

Question 34

Given the following information, at what point does a profit maximizing monopsonist, who is also a monopolist, stop hiring additional workers?

Number of workers	Value of Marginal Product of Labor (VMPL=P*MPL)	Marginal Revenue Product of Labor (MRPL=MR*MPL)	Marginal Cost
1	20	25	25
2	35	35	30
3	40	45	40
4	45	55	50

Choose one answer.

	A. When number of workers is 1
	B. When number of workers is 2
	C. When number of workers is 3
	D. When number of workers is 4

Question 35

If a minimum wage is imposed on a monopsonist, all of the following labor market effects take place, EXCEPT:

Choose one answer.

	A. There is an increase in the number of workers hired.
	B. There is an increase in the wage rate to the workers.
	C. There is a decrease in monopsonist profits.
	D. There is a decrease in the number of workers hired.

Question 36

When the wage in the labor market is less than the equilibrium wage,which of the following occurs?

Choose one answer.

	A. An excess supply of labor and workers compete with each other for a limited number of jobs.
	B. There is arbitrage across labor markets.
	C. Firms compete with each other, because there is a shortage of workers.
	D. There is a labor market friction

Question 37

Fill in the blank. The extra wages offered by firms to compensate workers for undesirable working conditions is termed as __________________.

Choose one answer.

	A. Equilibrium wages
	B. Non pecuniary wages
	C. Bonuses
	D. Compensating wage differentials

Question 38

Firm A and firm B are competitors and require their employees to do similar jobs. Although firm A and firm B are equal in size and worker characteristics in both firms are the same, workers in firm A work in a rather inhospitable climate as compared to firm B. Assuming that all workers are utility maximizing individuals, they have perfect information about their job characteristics and that sufficient labor mobility exists, which of the following must be true?

Choose one answer.

	A. Workers in firm A are jealous of workers in firm B.
	B. Workers in firm A are paid higher than workers in firm B.
	C. Firm A is tricking its employees into believing they are paid just as well employees in firm B.
	D. Firm A is coercing its employees to work for them.

Question 39

U^A and U^B are the indifference curves for individuals A and B respectively. From the graph, what can we can infer?

Choose one answer.

	A. Individual A is more risk averse than individual B.
	B. Individual B is more risk averse than individual A.
	C. Both individuals prefer risky jobs.
	D. Risk factor of the individuals cannot be interpreted from the graph.

Question 40

∏^y and ∏^x represent the isoprofit curves for firm Y and firm X respectively. From the graph, what can we infer?

Choose one answer.

	A. Both firms are risk lovers.
	B. The marginal cost of reducing risk is greater for firm X than it is for firm Y.
	C. The marginal cost of reducing risk is greater for firm Y than it is for firm X.
	D. The risk factor of the two firms cannot be compared with the given information.

Question 41

Which of the following nonpecuniary aspect of job differences would NOT qualify for compensating wage differential amongst firms?

Choose one answer.

	A. Location of the firm
	B. Work environment
	C. Safety issues
	D. Number of computers in the firm

Question 42

Which of the following best describes the "offer curve?"

Choose one answer.

	A. Different wage offers made by firms to individuals depending on their education level
	B. Different combinations of wage-risk demanded by different individuals
	C. Different combinations of wage-risk offered by different firms
	D. Different levels of risk offered by the firm at the existing wage

Question 43

Suppose a drop in the compensating wage differential paid to workers employed in dangerous jobs is attributed to the fact that people have become more excited about taking on risk. Assuming that wage differential is on the y-axis and the number of workers is on the x-axis, what does this reduction imply?

Choose one answer.

	A. The demand curve for workers in risky jobs has decreased, resulting in a rightward shift in the demand curve.
	B. The supply curve of workers has increased, resulting in a rightward shift in the curve.
	C. The demand curve for workers has increased, resulting in a rightward shift in the curve.
	D. The supply curve of workers has increased, resulting in a leftward shift in the curve.

Question 44

Fill in the blank. Assuming that all other factors are constant, an individual who is strongly risk averse is likely to have a job that pays __________________.

Choose one answer.

	A. More than the average wage
	B. Extremely high wages
	C. Less than the average wage
	D. Just the average wage

Question 45

There are 100 employees in both firms A and B. Assuming that the probability of death for employees in firm A is greater than that for employees in firm B by .01, firm A compensates its employees by paying them $5000 more annually. What is the value of human life in firm A?

Choose one answer.

	A. $5 million
	B. $5000
	C. $50
	D. $500,000

Question 46

Not all individuals attend college. Which of the following reasons is NOT a valid explanation for this statement?

Choose one answer.

	A. Some people have higher taste for schooling than others.
	B. People who are credit constrained may not be able to attend college.
	C. People who value the present relatively more than the future choose not to go to college.
	D. Returns to college are uncertain, and risk averse individuals would rather invest in college education.

Question 47

Ability bias suggests that individuals with higher levels of abilities are more likely to attend college, resulting in which of the following, and why?

Choose one answer.

	A. An upward bias while calculating the returns to education, because it undermines the impact of education
	B. A downward bias while calculating the returns to education, because it undermines the impact of education
	C. An upward bias while calculating the returns to education, because ability increases earnings
	D. A downward bias while calculating the returns to education, because ability increases earnings

Question 48

The costs of college education include all of the following, EXCEPT:

Choose one answer.

	A. Psychic costs.
	B. Forgone earnings.
	C. Costs of books, tuition, and supplies.
	D. Cost of food and lodging.

Question 49

Why do workers continue making investments in human capital throughout their lifetime?

Choose one answer.

	A. Because people update their preferences
	B. Because returns to human capital change overtime
	C. Because human capital depreciates
	D. All of the above

Question 50

Which of the following implies complementarities in human capital investments?

Choose one answer.

	A. Job training
	B. Investments in early childhood education
	C. Post-secondary financial aid
	D. Investments in secondary schooling

Question 51

Because employers cannot directly observe a worker's productivity before they are hired, they use which of the following to sort out the better applicants?

Choose one answer.

	A. Signals in the form of education level, years of experience, etc.
	B. Report cards from teachers and previous employers
	C. A lie detector
	D. Ranking of schools the applicant attended

Question 52

For firms to use education as a signal of productivity, the signaling model indicates that which of the following statements is true?

Choose one answer.

	A. Education must increase productivity.
	B. Education is essential as a signal.
	C. Cost of education must be higher for the less productive workers, and vice versa.
	D. Cost of education has nothing to do with the productivity level.

Question 53

Which of the following statements is a fallout of the presence of complementarities in human capital investments?

Choose one answer.

	A. Investing in later human capital is preferred over investments in early childhood human capital.
	B. Higher education is subsidized.
	C. Banks are willing to give loans for early education.
	D. Subsidies for later human capital is ineffective in reducing income inequalities.

Question 54

Assume there are two periods: t = 1 is today, and t = 2 is tomorrow. An individual can choose to go to college today and work tomorrow, or he can choose not to go to college and work in both periods. If the individual does not attend college, he earns $100 in each period. If he goes to college today, he only earns $200 tomorrow. Assuming the discount rate is 0.5, what choice will the individual make, and why?

Choose one answer.

	A. The individual will choose to go to college, because the present value of earnings from attending college is greater than the present value of earnings from not attending college.
	B. The individual will choose not to go to college, because the present value of earnings from not attending college is greater than the present value of earnings from attending college.
	C. The individual will choose to go either way, because there is no difference in earnings whether or not he attends college.
	D. There is not enough information provided for the individual to make the decision.

Question 55

In calculating the return to school, one of the main problems is that of self-selection bias, which refers to which of the following?

Choose one answer.

	A. Schooling is not randomly assigned, and individuals usually self-select into schooling.
	B. The sample of individuals who attend college is a selected or choice based sample.
	C. We cannot observe all aspects of an individual's human capital.
	D. Correlations in random variables do not necessarily reflect causation.

Question 56

Geographic mobility is more likely to occur, if which of the following statements is true?

Choose one answer.

	A. The difference in wages or salaries is not much.
	B. The worker is happy in his current job or location.
	C. The direct costs associated with moving are high.
	D. There is a longer time period over which benefits can be realized.

Question 57

Consider the following statement, and then answer the question: 'Individuals with higher levels of educational attainment are more likely to move (holding age constant).' Which of the following best describes one of the reasons for this phenomenon?

Choose one answer.

	A. Individuals with higher level of education are more dynamic.
	B. Highly educated individuals are less attached to family ties and more attached to their work.
	C. Individuals with low levels of education generally work in local labor markets and are less likely to engage in national search.
	D. Individuals with low levels of education are skeptical of new environments.

Question 58

What would be the effect of immigration in domestic labor markets?

Choose one answer.

	A. There would be a rightward shift in the supply of labor (in the market in which they participate), lowering wages and reducing the number of domestic workers available in that market.
	B. There would be an increase in the demand for final good and services bought by the immigrants, thereby increasing the demand for labor that produces these goods and services.
	C. There would be an increase in the wages of immigrants, because domestic workers refuse to do the work that immigrants would do.
	D. Both A and B are correct.

Question 59

Which of the following statements about job turnover is false?

Choose one answer.

	A. Job quits rise during economic recessions and fall during economic expansions.
	B. Younger workers are more likely to quit a job than are older workers.
	C. If the cost of quitting is high, job turnover will decline.
	D. Larger firms have lower quit rates.

Question 60

The psychic costs experienced by workers when they move from one location to another, refers to which of the following?

Choose one answer.

	A. Cost of higher living expenses
	B. Cost of hiring movers
	C. Cost of leaving behind friends, co-workers, family, and the familiar environment
	D. Cost in terms of time invested in making new friends

Question 61

The term "return migration" refers to which of the following?

Choose one answer.

	A. The increase in earnings for immigrants
	B. Immigrant workers returning to their previous area of residence
	C. Immigrant workers moving onward to other locations
	D. Illegal immigrants who are deported

Question 62

Why does the overall effect of immigration on the U.S. economy appear to be positive?

I. Immigrants pay more in taxes than they consume in government services.

II. immigrants bring their human capital investments with them when they immigrate, providing the U.S. with the benefits of their enhanced productivity without having to cover the cost of providing the human capital.

Choose one answer.

	A. Only I is correct.
	B. Only II is correct.
	C. Both I and II are correct.
	D. Neither I nor II is correct.

Question 63

Fill in the blank. The presence of mobility costs does not let the law of one price prevail in markets, giving the firms some sort of ________________.

Choose one answer.

	A. Monopsony power
	B. Monopoly power
	C. Bargaining power
	D. Signal about the ability of the workers

Question 64

Fill in the blank. The likelihood of migrating across geographic regions depends upon the economic condition in ___________________.

Choose one answer.

	A. The destination state
	B. The state of origin
	C. Both the destination and the state of origin
	D. Neighboring states

Question 65

Which of the following represents a real negative externality as a result of migration?

Choose one answer.

	A. An increase in output in the migrating nation
	B. Migrants earning less than native workers
	C. An increase in the number of doctors from foreign countries, reducing the number of doctors from the domestic country
	D. High pollution levels due to increase in population in a given city where migration is high

Question 66

Which of the following situations best describes discrimination in the labor market?

Choose one answer.

	A. Wages paid to a college graduate are more than what is paid to a high school graduate.
	B. Wages received by a manager are more than the wage received by a secretary.
	C. An individual with 5 years' experience gets higher wages than an individual fresh out of college.
	D. Workers with the same mix of skills and abilities and performing the same job in a firm get paid different wages.

Question 67

Which of the following explains reasons for the gender wage gap?

Choose one answer.

	A. Variation in the average weekly hours of work
	B. Differences in educational attainment
	C. Differences in prior work experience and occupational choice
	D. All of the above

Question 68

Fill in the blank. According to ________________, low wages received by women are a result of a relatively large supply of women in low paying occupations who are voluntarily selected by women.

Choose one answer.

	A. The crowding out hypothesis
	B. Employer discrimination
	C. Employee discrimination
	D. Statistical discrimination

Question 69

Firm Fair and Just, Inc. has no inherent taste for discrimination except that it recognizes that the workers of a certain race or gender possess some undesirable characteristics that are not directly observable. Holding everything else constant, firm Fair and Just, Inc. chooses not to hire workers of this race or gender. What is this kind of discrimination called?

Choose one answer.

	A. Employee discrimination
	B. Employer discrimination
	C. Statistical discrimination
	D. Customer discrimination

Question 70

Government policy to combat discrimination can be justified on at least which of the following two grounds?

Choose one answer.

	A. Political pressure and union pressure
	B. Equity and efficiency
	C. Equity and avoidance of litigation
	D. Equity and unio pressure

Question 71

Why is measuring discrimination difficult?

Choose one answer.

	A. Employers do not like to admit that they are discriminating.
	B. It is not possible to take into consideration variables like higher motivation or interpersonal skills that can affect potential productivity.
	C. Workers who are discriminated against are embarrassed to speak about it.
	D. Discrimination levels are so low that measuring it accurately is a problem.

Question 72

Fill in the blank. A discriminatory employer pays a male worker a wage of w_m, but to its female workers, it pays a wage of w_f + d (where d is the discrimination coefficient.) The employer will be indifferent between hiring a man and a woman only if ________________.

Choose one answer.

	A. w_m>w_f+d
	B. w_m< w_f+d
	C. w_m=w_f+d
	D. w_m=w_f(1+d)

Question 73

If employee discrimination exists in the form of male employees having a distaste for working with women, the wage differential between men and women might do which of the following, and why?

Choose one answer.

	A. Increase, because the men will be willing to work with women only if they get a wage premium
	B. Increase, because employers would hire a sex-segregated work force and each group would be paid differently
	C. Stay the same, because it would be against the law to pay the men and women different wages
	D. Decrease, because the employer would compensate the women with a premium wage for putting up with the discrimination

Question 74

According to the dual labor market theory, the labor market is composed of which groups?

Choose one answer.

	A. A domestic labor market and an international labor market
	B. The market for male workers and the market for female workers
	C. Workers in the private sector and in the government sector
	D. A high-wage primary segment and a low-wage secondary segment

Question 75

Choose the best answer to fill in the blanks. One of the differences between the neoclassical models of labor market and the segmented labor market theory is that the segmented theory emphasizes ______________, while ________________ dominates the neoclassical models.

Choose one answer.

	A. Demand side and institutional factors, supply side and individual factors
	B. Supply side and individual factors, demand side and institutional factors
	C. Increased worker mobility, limited worker mobility
	D. Opposition to minimum wages, support of minimum wages

Question 76

Fill in the blank. Jane has been looking for a job for almost a year and finally accepts a part time job, working fewer hours than she would ideally like to. This type of situation in labor economics is referred to as ________________.

Choose one answer.

	A. Discouraged worker situation
	B. Underemployment
	C. Frictional unemployment
	D. Cyclical unemployment

Question 77

Which of the following statements about gender differences in unemployment are inaccurate?

I. The increase in women's labor force attachment has reduced women's turnover rate relative to men's.

II. The male dominated manufacturing sector has expanded relative to the female dominated service sector.

Choose one answer.

	A. Only I is incorrect.
	B. Only II is incorrect.
	C. Both I and II are incorrect.
	D. Neither I nor II is incorrect.

Question 78

Which of the following cases fall under the "non standard" category of employment?

I. Mary is an independent contractor for the Department of Defense.

II. Jill is a computer programmer hired directly by Cisco.

III. Dave, a graduate student, is a part time researcher at Max Publishing

Choose one answer.

	A. Both I and II represent non standard workers.
	B. Both II and III represent non standard workers.
	C. Both I and III represent non standard workers.
	D. Only II represents a non standard worker.

Question 79

Which of the following is a reason for an increase in non standard workers?

Choose one answer.

	A. The increase in the number of small firms who are more likely to benefit from contracting workers than hiring full time employees
	B. The ability of workers to experience different employers as temporary employees and enjoy diverse working conditions
	C. The firms wanting to exploit workers and make them do a variety of jobs
	D. The retirement age being so high, making the firms fear that the workers may lose their productivity along the way

Question 80

An increase in the rate of inflation above the expected one results in which of the following?

Choose one answer.

	A. An immediate increase in real wages, prolonging the length of a job search
	B. Higher nominal wage offers and an initial drop in the length of a job search
	C. A decrease in nominal wages by workers in desperation to get a job
	D. Workers decreasing their acceptance wage

Question 81

Which of the following is NOT necessarily true about unemployment compensation?

Choose one answer.

	A. The exhaustion of unemployment benefits result in a decrease in the acceptance wage
	B. Unemployment benefits lengthens the duration of job search
	C. Unemployment benefits are provided to workers only as long as they actively seek work, up to a specified number of weeks
	D. New labor market entrants and reentrants are just as eligible for receiving unemployment benefits as are unemployed workers

Question 82

Which of the following statements best describes efficiency wages?

Choose one answer.

	A. These are wages that are lower than the market clearing wage, because workers do not put in much effort.
	B. These wages are higher than the market clearing wage as a result of labor unions.
	C. These wages are higher than the market clearing wage, inducing workers to put in more effort but also generating unemployment.
	D. These are wages that are equal to the market clearing wage.

Question 83

If the prevailing wages are higher than the market wages but unemployment levels are very low, then which of the following is accurate?

Choose one answer.

	A. Workers would mostly be found shirking work.
	B. Workers would be motivated to work more.
	C. The effort put in by the workers would be immeasurable.
	D. Firms would be firing workers, if the workers were not performing well.

Question 84

In order to reduce labor turnover, firms often have internal labor markets use which of the following?

Choose one answer.

	A. The usual demand and supply forces
	B. Job ladders
	C. Pay based on productivity levels
	D. Severe penalties if the worker leaves the firm

Question 85

Which of the following answer choices demonstrates an accurate review of the following statement? "Structural unemployment can exist even if the minimum wage is zero."

Choose one answer.

	A. The above statement is correct.
	B. The above statement is false.
	C. There is no correlation between structural unemployment and minimum wage, hence the statement is irrelevant.
	D. The statement should be rephrased as "structural unemployment can exist only if the minimum wage is zero."

Question 86

Which of the following activities DOES NOT fall under the realm of union activity?

Choose one answer.

	A. Providing job training to union members
	B. Political lobbying
	C. Collaborating to enhance a firm's research and development
	D. Collective bargaining with employers over contracts

Question 87

Which of the following statements regarding labor unions is false?

Choose one answer.

	A. Unionization tends to be higher in the service industries and lower in the manufacturing industries.
	B. Managers, sales workers, and other white collar workers tend to have lower unionization rates.
	C. Unionization tends to be higher in industries where labor demand elasticities are low, such as transportation, communications, and utilities.
	D. Unionization tends to be higher in the public sector and lower in the private sector.

Question 88

Which of the following causes contribute to the decline in unionism?

Choose one answer.

	A. Structural changes in the labor force and the economy that are unfavorable to the unions
	B. Managerial opposition where in firms may hire consultants, permanent strike breakers, illegally fire pro union workers, etc.
	C. Government and firms providing services (such as workers compensation) to its employees that were previously provided by unions
	D. All of the above

Question 89

In the monopoly union model, the utility maximizing wage and employment for the union is at what point?

Choose one answer.

	A. Where the union indifference curve intersects the labor demand curve at the highest level of employment
	B. Where the union indifference curve intersects the labor demand curve at the highest level of wages
	C. Where worker productivity is at the maximum level
	D. Where the union indifference curve is tangent to the labor demand curve

Question 90

Efficiency contract refers to which of the following?

Choose one answer.

	A. Combinations of wage and employment where worker productivity is at the maximum level
	B. Combinations of wage and employment where at least one party is better off without the other party being worse off
	C. High wages at every level of employment
	D. The union's success in bargaining over wages in accordance with worker productivity

Question 91

Why do union workers have more fringe benefits than nonunion workers?

Choose one answer.

	A. Because union workers are uncertain about their job tenure and thus are more likely to rely on a pension
	B. Because union workers tend to be younger and have a strong preference for fringe benefits
	C. Because union workers have higher wages and want to "buy" more fringe benefits
	D. Because unions are able to express worker's preferences for more fringe benefits

Question 92

If in a given labor market the wage rate would be $10 without a union and $15 with a union, then what is the pure union wage advantage?

Choose one answer.

	A. $50
	B. $33.33
	C. $5
	D. $15

Question 93

All of the following are negative effects of labor unions, EXCEPT:

Choose one answer.

	A. Unions may demand the hiring of unnecessary workers.
	B. The higher wage in the union sector causes workers to be displaced to the nonunion sector.
	C. Union workers have higher productivity due to their greater worker experience.
	D. The higher wage in the union sector causes workers to look for jobs in the non union sector, but if search costs are high, there is an efficiency loss.

Question 94

How might a union contribute in increasing income inequality?

Choose one answer.

	A. By increasing the wages of skilled blue-collar workers relative to unskilled blue-collar workers
	B. By trying to make pay tied to jobs and not individual workers
	C. By seeking to standardize wage rates among firms
	D. By reducing the white-collar to blue-collar differential

Question 95

Which of the following statements regarding the tournament type of compensation scheme is true?

Choose one answer.

	A. This compensation scheme encourages workers to collaborate.
	B. Only relative performance matters as opposed to absolute performance.
	C. All workers are respected and paid equally irrespective of performance level.
	D. Promotions are awarded instantly without any delay.

Question 96

In the principal-agent problem within labor economics, shirking refers to which of the following?

Choose one answer.

	A. Employers do not like to acknowledge the workers for their efforts.
	B. Employers ignore the union's activities.
	C. Workers do not work to their maximum potential.
	D. Firms ignore the competition from other firms.

Question 97

A grocery store in Cake Town likes to outsource its cakes from a local bakery. The bakery and the grocery store have a piece rate employment contract. According to this contract, how is the bakery paid?

Choose one answer.

	A. By the hour, for its time devoted to making cakes
	B. With a flat monthly rate
	C. By commission based on the number of cakes sold
	D. In relation to the output, or the number of cakes made by the baker

Question 98

Piece rates are not always the best employment contracts to make with workers. Which of the following statements about piece rates is false?

Choose one answer.

	A. Some outputs are difficult to measure by the firm/employer.
	B. A risk averse worker with full claimant on its efforts may require a higher compensation from the firm when faced with risk.
	C. Piece rate workers focus more on the quality of their product rather than the quantity.
	D. Piece rate workers focus more on the quantity rather than the quality of their product.

Question 99

Which of the following is an example of bonus or profit sharing scheme between the employer and the workers?

Choose one answer.

	A. A worker is paid for the number of output he produces.
	B. A manager's compensation is tied to a firm's stock prices.
	C. A worker is paid by the hour.
	D. A manager is paid a high monthly salary.

Question 100

Fill in the blank. In order to encourage younger employees to increase their efforts and avoid being fired, a firm pays its entry level workers less than the worker's marginal revenue product. However, the older workers in the firm are paid more than their marginal revenue product. This type of compensation scheme is referred to as _________________.

Choose one answer.

	A. Deferred compensation
	B. Efficiency wages
	C. Piece rates
	D. Bonus and profit sharing