Question 1

Why did Henry Ford decide to pay $5 per day to his workers?

Accepted Answer

A)  He was forced by a union to pay $5 per day. 
B)  He paid $5 per day to improve worker nutrition. 
C)  He believed that $5 a day would increase worker productivity. 
D)  He paid $5 per day to illustrate that he was a humanitarian. 
A)  He was forced by a union to pay $5 per day. 
B)  He paid $5 per day to improve worker nutrition. 
C)  He believed that $5 a day would increase worker productivity. 
D)  He paid $5 per day to illustrate that he was a humanitarian.

Question 2

A minimum wage above equilibrium creates a labour surplus.

Accepted Answer

A) True 
 B)False

Question 3

(Challenging) Draw a firm's labour demand curve that intersects the vertical axis at $20 per hour, and choose a point on the curve corresponding to an hourly wage of $12 and employment of 50 workers.
a. Explain the significance of the labour demand curve, and show why such a curve is downward sloping.
b. At the employment level of 50 workers, what is the total amount the employer pays in wages?
c. At the employment level of 50 workers, what is the firm's profit? (Hint: At each level of employment, the labour demand curve shows the additional value of production created by hiring an extra worker.)

Accepted Answer

a. When the market wage is high compared

Question 4

Even though most spells of unemployment are short, most unemployment results from long-term unemployment.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following best defines gross job destruction?

Accepted Answer

A)  the sum of job losses across all firms, either by firms reducing their employment or going out of business, in a given year 
B)  the number of jobs created by new firms less jobs lost in established firms in a given year 
C)  the number of job losses due to firms reducing their employment in a given year 
D)  the number of job losses due to firms going out of business in a given year 
A)  the sum of job losses across all firms, either by firms reducing their employment or going out of business, in a given year 
B)  the number of jobs created by new firms less jobs lost in established firms in a given year 
C)  the number of job losses due to firms reducing their employment in a given year 
D)  the number of job losses due to firms going out of business in a given year

Question 6

Which statement best defines collective bargaining?

Accepted Answer

A)  It is the process by which the government sets exemptions from the minimum-wage law. 
B)  It is setting the same wage for all employees to prevent jealousy among workers. 
C)  It is the situation when firms collude to set the wages of employees in order to keep them below equilibrium. 
D)  It is the process by which unions and firms agree on the terms of employment. 
A)  It is the process by which the government sets exemptions from the minimum-wage law. 
B)  It is setting the same wage for all employees to prevent jealousy among workers. 
C)  It is the situation when firms collude to set the wages of employees in order to keep them below equilibrium. 
D)  It is the process by which unions and firms agree on the terms of employment.

Question 7

Curtis is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. John is an accountant. He has looked for work for some time, but no accounting firms are hiring. Which of the following best describes the nature of their unemployment?

Accepted Answer

A)  John and Curtis are both frictionally unemployed. 
B)  John and Curtis are both structurally unemployed. 
C)  Curtis is frictionally unemployed, and John is structurally unemployed. 
D)  Curtis is structurally unemployed, and John is frictionally unemployed. 
A)  John and Curtis are both frictionally unemployed. 
B)  John and Curtis are both structurally unemployed. 
C)  Curtis is frictionally unemployed, and John is structurally unemployed. 
D)  Curtis is structurally unemployed, and John is frictionally unemployed.

Question 8

What is the most likely result of efficiency wages?

Accepted Answer

A)  reduced labour-force participation rates 
B)  reduced natural rate of unemployment 
C)  reduced incentive to shirk responsibilities 
D)  increased worker turnover 
A)  reduced labour-force participation rates 
B)  reduced natural rate of unemployment 
C)  reduced incentive to shirk responsibilities 
D)  increased worker turnover

Question 9

What does the theory of efficiency wages explain?

Accepted Answer

A)  why setting wages at the equilibrium level may increase unemployment 
B)  why it may be in the best interest of firms to offer wages that are above the equilibrium level 
C)  why the most efficient way to pay workers is to pay them according to their skills 
D)  why it is efficient for firms to set wages at the equilibrium level 
A)  why setting wages at the equilibrium level may increase unemployment 
B)  why it may be in the best interest of firms to offer wages that are above the equilibrium level 
C)  why the most efficient way to pay workers is to pay them according to their skills 
D)  why it is efficient for firms to set wages at the equilibrium level

Question 10

What is most likely to cause frictional unemployment?

Accepted Answer

A)  the minimum wage 
B)  a worker leaving a job to find one with better benefits 
C)  labour unions 
D)  an increase in income tax 
A)  the minimum wage 
B)  a worker leaving a job to find one with better benefits 
C)  labour unions 
D)  an increase in income tax

Question 11

What is cyclical unemployment closely associated with?

Accepted Answer

A)  long-term economic growth 
B)  short-run ups and downs of the economy 
C)  fluctuations in the natural rate of unemployment 
D)  seasonal fluctuations in spending 
A)  long-term economic growth 
B)  short-run ups and downs of the economy 
C)  fluctuations in the natural rate of unemployment 
D)  seasonal fluctuations in spending

Question 12

Matt loses his job in April and decides play golf for a few months. Assuming that other things remain the same, what happens to the unemployment rate?

Accepted Answer

A)  The unemployment rate decreases because he is not in the labour force anymore. 
B)  The unemployment rate increases because he is still in the labour force. 
C)  The unemployment rate decreases because he is still in the labour force. 
D)  The unemployment rate increases because he is not in the labour force anymore. 
A)  The unemployment rate decreases because he is not in the labour force anymore. 
B)  The unemployment rate increases because he is still in the labour force. 
C)  The unemployment rate decreases because he is still in the labour force. 
D)  The unemployment rate increases because he is not in the labour force anymore.

Question 13

Which statement best defines "job search"?

Accepted Answer

A)  It is a process through which the firms determine the equilibrium wage. 
B)  It is an imbalance between labour supply and labour demand. 
C)  It is the process of matching workers with appropriate jobs. 
D)  It is the process through which firms hire new employees. 
A)  It is a process through which the firms determine the equilibrium wage. 
B)  It is an imbalance between labour supply and labour demand. 
C)  It is the process of matching workers with appropriate jobs. 
D)  It is the process through which firms hire new employees.

Question 14

Which country has the lowest percentage of unionized workers?

Accepted Answer

A)  United States 
B)  Canada 
C)  Sweden 
D)  Denmark 
A)  United States 
B)  Canada 
C)  Sweden 
D)  Denmark

Question 15

According to the theory of efficiency wages, firms operate more efficiently if they can pay wages that are below the equilibrium level.

Accepted Answer

A) True 
 B)False

Question 16

Dawn is the CEO of a corporation that hires nonunion labour. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive equilibrium wage, what is most likely to happen?

Accepted Answer

A)  The profits of her firm may increase. 
B)  The higher wages will induce her workers to shirk their responsibilities. 
C)  The turnover of her workers may increase. 
D)  She will face a shortage of quality workers. 
A)  The profits of her firm may increase. 
B)  The higher wages will induce her workers to shirk their responsibilities. 
C)  The turnover of her workers may increase. 
D)  She will face a shortage of quality workers.

Question 17

Over half of the unemployed are recent entrants into the labour force.

Accepted Answer

A) True 
 B)False

Question 18

What does the labour-force participation rate measure?

Accepted Answer

A)  the percentage of the total adult population that is in the labour force 
B)  the percentage of the total adult population that is employed 
C)  the percentage of the labour force that is employed 
D)  the percentage of the labour force that is either employed or unemployed 
A)  the percentage of the total adult population that is in the labour force 
B)  the percentage of the total adult population that is employed 
C)  the percentage of the labour force that is employed 
D)  the percentage of the labour force that is either employed or unemployed

Question 19

Table 9-1
This table shows the 2013 data for males and females aged 15 and over in the country of Bolivar.  
-Refer to the Table 9-1. What is the adult labour force in Bolivar?

Accepted Answer

A)  90 million 
B)  135 million 
C)  160 million 
D)  230 million 
A)  90 million 
B)  135 million 
C)  160 million 
D)  230 million

Question 20

How do sectoral shifts in the economy affect unemployment?

Accepted Answer

A)  They create structural unemployment. 
B)  They reduce unemployment. 
C)  They increase unemployment due to job search. 
D)  Overall, they leave unemployment unchanged. 
A)  They create structural unemployment. 
B)  They reduce unemployment. 
C)  They increase unemployment due to job search. 
D)  Overall, they leave unemployment unchanged.

Why did Henry Ford decide to pay $5 per day to his workers?

A minimum wage above equilibrium creates a labour surplus.

Even though most spells of unemployment are short, most unemployment results from long-term unemployment.

Which of the following best defines gross job destruction?

Which statement best defines collective bargaining?

What is the most likely result of efficiency wages?

What does the theory of efficiency wages explain?

What is most likely to cause frictional unemployment?

What is cyclical unemployment closely associated with?

Matt loses his job in April and decides play golf for a few months. Assuming that other things remain the same, what happens to the unemployment rate?

Which statement best defines "job search"?

Which country has the lowest percentage of unionized workers?

According to the theory of efficiency wages, firms operate more efficiently if they can pay wages that are below the equilibrium level.

Dawn is the CEO of a corporation that hires nonunion labour. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive equilibrium wage, what is most likely to happen?

Over half of the unemployed are recent entrants into the labour force.

What does the labour-force participation rate measure?

Table 9-1 This table shows the 2013 data for males and females aged 15 and over in the country of Bolivar. -Refer to the Table 9-1. What is the adult labour force in Bolivar?

How do sectoral shifts in the economy affect unemployment?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 9: Unemployment and Its Natural Rate

Why did Henry Ford decide to pay $5 per day to his workers?

A minimum wage above equilibrium creates a labour surplus.

Even though most spells of unemployment are short, most unemployment results from long-term unemployment.

Which of the following best defines gross job destruction?

Which statement best defines collective bargaining?

What is the most likely result of efficiency wages?

What does the theory of efficiency wages explain?

What is most likely to cause frictional unemployment?

What is cyclical unemployment closely associated with?

Matt loses his job in April and decides play golf for a few months. Assuming that other things remain the same, what happens to the unemployment rate?

Which statement best defines "job search"?

Which country has the lowest percentage of unionized workers?

According to the theory of efficiency wages, firms operate more efficiently if they can pay wages that are below the equilibrium level.

Dawn is the CEO of a corporation that hires nonunion labour. According to the theory of efficiency wages, if she decides to pay her workers more than the competitive equilibrium wage, what is most likely to happen?

Over half of the unemployed are recent entrants into the labour force.

What does the labour-force participation rate measure?

Table 9-1 This table shows the 2013 data for males and females aged 15 and over in the country of Bolivar. -Refer to the Table 9-1. What is the adult labour force in Bolivar?

How do sectoral shifts in the economy affect unemployment?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters