Question 1

Unions attempt to raise wage rates for their members by

Accepted Answer

A)  Reducing the supply of the product their members produce. 
B)  Lowering barriers to entry so their members have greater opportunities. 
C)  Reducing the demand for labour so there are fewer non-union competitors. 
D)  Negotiating a higher wage rate through collective bargaining. 
A)  Reducing the supply of the product their members produce. 
B)  Lowering barriers to entry so their members have greater opportunities. 
C)  Reducing the demand for labour so there are fewer non-union competitors. 
D)  Negotiating a higher wage rate through collective bargaining.

Question 2

Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Accepted Answer

Most unemployed people in the economy ar

Question 3

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?

Accepted Answer

A)  Structural unemployment 
B)  Cyclical unemployment 
C)  Frictional unemployment 
D)  None of these answers 
A)  Structural unemployment 
B)  Cyclical unemployment 
C)  Frictional unemployment 
D)  None of these answers

Question 4

Which of the following is an example of a reason why firms might pay efficiency wages? At equilibrium wages:

Accepted Answer

A)  Workers sleep when the boss is not looking because workers are not deeply concerned about being fired. 
B)  Workers often quit to find better jobs. 
C)  Only minimally qualified workers apply for the job. 
D)  Workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy. 
E)  All of these answers 
A)  Workers sleep when the boss is not looking because workers are not deeply concerned about being fired. 
B)  Workers often quit to find better jobs. 
C)  Only minimally qualified workers apply for the job. 
D)  Workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy. 
E)  All of these answers

Question 5

Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would attribute at least part of this difference to minimum-wage laws.

Accepted Answer

People who are experienced and educated

Question 6

Unions tend to increase the disparity in pay between insiders and outsiders by

Accepted Answer

A)  Increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the non-unionized sector. 
B)  Increasing the demand for workers in the unionized sector. 
C)  Decreasing the demand for workers in the unionized sector. 
D)  Increasing the wage in the unionized sector, which may create an increase in the supply of workers in the non-unionized sector. 
A)  Increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the non-unionized sector. 
B)  Increasing the demand for workers in the unionized sector. 
C)  Decreasing the demand for workers in the unionized sector. 
D)  Increasing the wage in the unionized sector, which may create an increase in the supply of workers in the non-unionized sector.

Question 7

If the cost of monitoring worker effort is high, then a firm can encourage workers to work hard by paying an efficiency wage because

Accepted Answer

A)  Paying an efficiency wage means a firm can monitor its workers more cheaply. 
B)  The efficiency wage will encourage workers to monitor each other's effort and report shirking to the employer. 
C)  Efficiency wages guarantee efficiency. 
D)  The efficiency wage will raise the cost to workers of losing their jobs, even though there may be a low risk of being dismissed for shirking. 
A)  Paying an efficiency wage means a firm can monitor its workers more cheaply. 
B)  The efficiency wage will encourage workers to monitor each other's effort and report shirking to the employer. 
C)  Efficiency wages guarantee efficiency. 
D)  The efficiency wage will raise the cost to workers of losing their jobs, even though there may be a low risk of being dismissed for shirking.

Question 8

If the market for day care workers is in equilibrium at €5.00 per hour as shown in this diagram, a minimum wage of €8.00 per hour will increase unemployment by

Accepted Answer

A)  300 workers. 
B)  500 workers. 
C)  600 workers. 
D)  No workers. 
A)  300 workers. 
B)  500 workers. 
C)  600 workers. 
D)  No workers.

Question 9

Which of the following government policies would fail to lower the unemployment rate?

Accepted Answer

A)  Establishing worker training programs 
B)  Establishing right-to-work laws 
C)  Reducing unemployment benefits 
D)  Establishing employment agencies 
E)  Raising the minimum wage 
A)  Establishing worker training programs 
B)  Establishing right-to-work laws 
C)  Reducing unemployment benefits 
D)  Establishing employment agencies 
E)  Raising the minimum wage

Question 10

Which of the following statements about efficiency wage theory is true?

Accepted Answer

A)  Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities. 
B)  Firms do not have a choice about whether they pay efficiency wages or not because law does determine these wages. 
C)  Paying the lowest possible wage is always the most efficient (profitable). 
D)  Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort. 
A)  Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities. 
B)  Firms do not have a choice about whether they pay efficiency wages or not because law does determine these wages. 
C)  Paying the lowest possible wage is always the most efficient (profitable). 
D)  Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

Question 11

Which of the following is a cost of unemployment to the economy?

Accepted Answer

A)  The opportunity cost of unemployment. 
B)  The tax and benefits effect. 
C)  The reverse multiplier effect. 
D)  All of the above. 
A)  The opportunity cost of unemployment. 
B)  The tax and benefits effect. 
C)  The reverse multiplier effect. 
D)  All of the above.

Question 12

A reservation wage is the

Accepted Answer

A)  Maximum wage the firm is willing to pay. 
B)  Tip necessary to get a waiter to reserve a table. 
C)  Minimum wage the worker is willing to accept. 
D)  Competitive equilibrium wage. 
A)  Maximum wage the firm is willing to pay. 
B)  Tip necessary to get a waiter to reserve a table. 
C)  Minimum wage the worker is willing to accept. 
D)  Competitive equilibrium wage.

Question 13

Unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labour and management.

Accepted Answer

A) True 
 B)False

Question 14

Table 2. The figures in the table below are taken from the statistics office in a fictional country called Exland. $\begin{array}{|l|r|}
\hline \text { Number of workers employed } & 8,400 \
\hline \text { Frictional unemployment } & 250 \
\hline \text { Structural unemployment } & 350 \
\hline \text { Cyclical unemployment } & 600 \
\hline \text { Discouraged workers } & 400 \
\hline \text { Adult population } & 12,000 \
\hline
\end{array}$
Refer to table 2. What is the labour force participation rate in Exland?

Accepted Answer

A)  12.5 per cent. 
B)  25 per cent. 
C)  60 per cent. 
D)  80 per cent. 
A)  12.5 per cent. 
B)  25 per cent. 
C)  60 per cent. 
D)  80 per cent.

Question 15

The labour-force participation rate is computed as

Accepted Answer

A)  (Employed divided by Adult Population) x 100. 
B)  (Employed divided by Labour Force) x 100. 
C)  (Labour Force divided by Adult Population) x 100. 
D)  (Adult Population divided by Labour Force) x 100. 
A)  (Employed divided by Adult Population) x 100. 
B)  (Employed divided by Labour Force) x 100. 
C)  (Labour Force divided by Adult Population) x 100. 
D)  (Adult Population divided by Labour Force) x 100.

Question 16

Firms may voluntarily pay wages above the level that balances the supply and demand for workers because the higher wage improves the average quality of workers that apply for employment.

Accepted Answer

A) True 
 B)False

Question 17

A minimum wage is likely to have a greater impact on the market for skilled workers than on the market for unskilled workers.

Accepted Answer

A) True 
 B)False

Question 18

Unemployment insurance

Accepted Answer

A)  Tends to increase unemployment by decreasing the cost of being unemployed. 
B)  Tends to decrease unemployment by providing limited resources to the unemployed. 
C)  Increases the hardships associated with unemployment. 
D)  Increases the amount of job security demanded by employees. 
A)  Tends to increase unemployment by decreasing the cost of being unemployed. 
B)  Tends to decrease unemployment by providing limited resources to the unemployed. 
C)  Increases the hardships associated with unemployment. 
D)  Increases the amount of job security demanded by employees.

Question 19

Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest?

Accepted Answer

Standard economic theory suggests that i

Question 20

Consider two labour markets in which jobs are equally attractive in all respects other than the wage rate. All workers are equally able to do either job. Initially, both labour markets are perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to

Accepted Answer

A)  Rise in both markets. 
B)  Fall in both markets 
C)  Rise for the union jobs, but remain unchanged for the non-union jobs. 
D)  Rise for the union jobs and fall for the non-union jobs. 
A)  Rise in both markets. 
B)  Fall in both markets 
C)  Rise for the union jobs, but remain unchanged for the non-union jobs. 
D)  Rise for the union jobs and fall for the non-union jobs.

Exam 23: Unemployment

Unions attempt to raise wage rates for their members by

Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?

Which of the following is an example of a reason why firms might pay efficiency wages? At equilibrium wages:

Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would attribute at least part of this difference to minimum-wage laws.

Unions tend to increase the disparity in pay between insiders and outsiders by

If the cost of monitoring worker effort is high, then a firm can encourage workers to work hard by paying an efficiency wage because

If the market for day care workers is in equilibrium at €5.00 per hour as shown in this diagram, a minimum wage of €8.00 per hour will increase unemployment by

Which of the following government policies would fail to lower the unemployment rate?

Which of the following statements about efficiency wage theory is true?

Which of the following is a cost of unemployment to the economy?

A reservation wage is the

Unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labour and management.

The labour-force participation rate is computed as

Firms may voluntarily pay wages above the level that balances the supply and demand for workers because the higher wage improves the average quality of workers that apply for employment.

A minimum wage is likely to have a greater impact on the market for skilled workers than on the market for unskilled workers.

Unemployment insurance

Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest?

Consider two labour markets in which jobs are equally attractive in all respects other than the wage rate. All workers are equally able to do either job. Initially, both labour markets are perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

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