Deck 2: Overview of the Labor Market

Question 1

Table 2.2 Workers in the Widget Industry

According to Table 2.2, in which year were the real earnings of workers in the Widget Industry highest?

A) 1966
B) 1976
C) 1986
D) 1996

Answer 1

B

Question 2

When the price of capital increases, the quantity of ________ demanded will ________, but the effect on ________ is ambiguous.

A) labor; increase; capital
B) labor; decrease; capital
C) capital; increase; labor
D) capital; decrease; labor

Answer 2

D

Question 3

If the price of a product decreases due to a decrease in demand, then

A) the firm moves to the left along the labor demand curve.
B) the firm moves to the right along the labor demand curve.
C) the labor demand curve shifts to the left.
D) the labor demand curve shifts to the right.

Answer 3

C

Question 4

The labor market does NOT

A) allocate workers to jobs.
B) coordinate employment decisions.
C) respond to price signals.
D) ensure that all workers are hired.

Question 5

When the price of labor falls, the quantity of ________ demanded will ________, but the effect on ________ is ambiguous.

A) labor; increase; capital
B) labor; decrease; capital
C) capital; increase; labor
D) capital; decrease; labor

Question 6

Because workers choose between various employers offering the same type of job based primarily on wages,

A) the market demand curve for chefs is downward sloping.
B) the market supply curve for chefs is upward sloping.
C) the firm supply curve for chefs is vertical.
D) the firm supply curve for chefs is horizontal.

Question 7

Table 2.1

Given the data in Table 2.1, the labor force participation rate is

A) 54%.
B) 65%.
C) 70%.
D) 80%.

Question 8

When wages increase, the substitution effect implies that employment will ________ and the scale effect implies that employment will ________.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 9

If the salaries of accountants increase and other conditions remain the same, then

A) a firm will move to the left along its labor demand curve for accountants.
B) a firm will move to the right along its labor demand curve for accountants.
C) the labor demand curve for accountants will shift to the left.
D) the labor demand curve for accountants will shift to the right.

Question 10

Because workers have varying preferences about the type of work they like to do,

A) the market demand curve for chefs is downward sloping.
B) the market supply curve for chefs is upward sloping.
C) the firm supply curve for chefs is vertical.
D) the firm supply curve for chefs is horizontal.

Question 11

Table 2.1

Given the data in Table 2.1, the unemployment rate is

A) 3.8%.
B) 5.0%.
C) 7.1%.
D) 7.8%.

Question 12

Table 2.2 Workers in the Widget Industry

According to Table 2.2, real earnings in the Widget Industry in 1986 were

A) $22,500.
B) $12,640.
C) $11,538.
D) $15,730.

Question 13

During the twentieth century, the unemployment rate in the United States

A) has remained roughly constant.
B) has consistently been higher than in other industrialized countries.
C) has generally decreased.
D) has become more stable.

Question 14

Jobs in the "secondary" labor market typically

A) are held by younger workers.
B) are low-wage or unstable jobs.
C) are the second job of workers who hold two jobs.
D) employ members of households containing two or more workers.

Question 15

If more people enter the labor market for architects, then

A) both the wage rate and the employment level will increase.
B) both the wage rate and the employment level will decrease.
C) the wage rate will increase and the employment level will decrease.
D) the wage rate will decrease and the employment level will increase.

Question 16

Long-term unemployment rates are higher in most Western European countries than in the United States because

A) unemployment rates are calculated differently in Western Europe.
B) nonmarket forces keep wages in Western Europe above the equilibrium level.
C) technological change has accelerated more quickly in Western Europe.
D) most Western European governments hire workers to perform jobs that are not in demand.

Question 17

A worker's income is equal to his

A) earnings.
B) wage rate multiplied by hours worked.
C) wages plus benefits.
D) earnings plus employee benefits plus unearned income.

Question 18

The labor force is made up of

A) all members of society.
B) all members of society who are at least 16 years of age.
C) all members of society who are at least 16 years old and are either employed or unemployed.
D) employed workers, unemployed workers, and retired workers.

Question 19

Average real hourly compensation of workers in the United States

A) has doubled since 1975.
B) can be shown to have changed or increased by a small amount since 1987
C) has risen at the same rate as average real hourly wages have during the last sixty years.
D) has remained relatively constant throughout the twentieth century.

Question 20

If a single small firm's demand for secretaries increases, then

A) its wage rate will increase and its employment level will remain the same.
B) its wage rate will increase and its employment level will increase.
C) its wage rate will remain the same and its employment level will increase.
D) both its wage rate and its employment level will remain the same.

Question 21

"Police persons are finding more lucrative and diverse alternative careers in the private sector" If this statement is true, then the supply curve of labor to policing will likely shift ________ and become ________ steep. Select the best pair of answers.

A) up; more
B) up; less
C) down; more
D) down; less

Question 22

If a union negotiates an industry-wide agreement to set wages above the equilibrium level,

A) the industry's demand curve for labor will shift inward.
B) there will be a surplus of labor in the industry.
C) there will be a shortage of labor in the industry.
D) there will be neither a shortage nor a surplus of labor in the industry.

Question 23

It has been said that CEOs (Chief Executive Officers who are in charge of their firms) are overpaid. Which of the following would be evidence (if true) that they are, in fact, overpaid?

A) CEOs make many times what their workers make.
B) Firms find that they can find equally qualified persons for a lower salary.
C) CEOs salaries have increased very rapidly.
D) When CEOs leave their jobs to take new jobs, their new jobs pay more.

Question 24

Which of the following events will cause a surplus of workers?

A) a wage above the market-clearing wage
B) an increase in the supply of workers
C) a decrease in the demand for workers
D) more workers wanting to work at higher wages

Question 25

If the price of capital increases in an industry and the scale effect dominates,

A) wages and employment levels will both increase.
B) wages and employment levels will both decrease.
C) wages will increase and employment levels will decrease.
D) wages will decrease and employment levels will increase.

Question 26

If unions raise wages above their market clearing level, then

A) more workers will be able to get better jobs, increasing employment.
B) there will be a shortage of workers.
C) persistently high rates of unemployment will result.
D) this will be Pareto efficient.

Question 27

Which of the following occurs if a firm pays workers more than the market wage?

A) Its application rate will be higher than usual.
B) Its quit rate will be lower than usual.
C) It will have a surplus of labor.
D) All of above occur.

Question 28

Economic rent is

A) the value of a worker's labor services.
B) a worker's wage rate.
C) the income a worker receives from his or her labor.
D) the amount by which a worker's wage exceeds his or her reservation wage.

Question 29

If every worker wants ten dollars more per hour to work, then wages will

A) go up by $10.
B) go up by more than $10.
C) go up by less than $10.
D) go down as employment falls.

Question 30

Which of these persons is officially classified as being "not in the labor force"?

A) Alex who was fired from his job two months ago and has yet to look for another job.
B) Bob who would start looking for work if he thought he could get a good job.
C) Cole who has never worked but just starting looking for work two weeks ago.
D) Durk who is working at a low wage job that does not challenge him.

Question 31

It has been said that teaching assistants to professors are underpaid. Which of the following would be evidence (if true) that they are underpaid?

A) There is a surplus of teaching assistants.
B) Teaching assistants are paid far less than professors, even though they are doing similar work.
C) Teaching assistants are made to work more than other workers in their job.
D) Professors have a hard time finding qualified teaching assistants.

Question 32

Workers in an industry are probably underpaid if

A) employers have difficulty hiring and retaining qualified workers.
B) the workers cannot afford to quit their jobs.
C) the workers could receive a higher salary in another occupation.
D) firms in the industry are making a positive profit.

Question 33

Which of the following events could explain why wages and employment could fall in a competitive labor market?

A) The demand curve shifts right and up.
B) The demand curve shifts left and down.
C) The supply curve shifts left and up.
D) The supply curve shifts right and down.

Question 34

Which area pays the highest real wage?

A) Nominal Wage $15; Consumer Price Index for Area $50
B) Nominal Wage $20; Consumer Price Index for Area $100
C) Nominal Wage $25; Consumer Price Index for Area $150
D) Nominal Wage $50; Consumer Price Index for Area $200

Question 35

In the Widget industry, it takes two workers (with other inputs) to produce each widget and since consumers demand 1000 widgets at its current price, 2000 workers are employed in the industry. Which of the following could occur if the price of capital falls and labor and capital are substitutes in production?

A) It takes 2.2 workers per widget and 1200 widgets are produced and sold.
B) It takes 1.9 workers per widget and 1200 widgets are produced and sold.
C) It takes 2.2 workers per widget and 900 widgets are produced and sold.
D) It takes 1.9 workers per widget and 900 widgets are produced and sold.

Question 36

Which of the following events will cause the labor demand curve to shift up and to the right?

A) a lower wage
B) an increase in product demand
C) an increase in the supply of labor
D) all of the above shift the labor demand curve up