Deck 7: The Labor Market, Wages, and Unemployment

Question 1

Refer to the following figure to answer
Figure 7.1: U.S. Unemployment Rate: 1975-2012 (Source: U.S. Bureau of Labor Statistics)

-Using Figure 7.1, identify the year of the peak of the boom:

A) 1982
B) 1992
C) 2005
D) 2010
E) 1990

Answer 1

1990

Question 2

Refer to the following figure to answer
Figure 7.1: U.S. Unemployment Rate: 1975-2012 (Source: U.S. Bureau of Labor Statistics)

-Using Figure 7.1, which of the following year(s) are the trough of a recession?

A) 1980
B) 1989
C) 2001
D) 2010
E) All of these answers are correct.

Answer 2

2010

Question 3

The labor market determines:

A) the equilibrium wage
B) the equilibrium quantity of employment
C) the equilibrium wage and the quantity of employment
D) the number of unemployed
E) All of these answers are correct.

Answer 3

E

Question 4

If the U.S. real output is growing, and labor income accounts for about two-thirds of this:

A) the unemployment rate is falling
B) on average, capital is getting poorer over time
C) income inequality is decreasing
D) on average, workers are getting richer over time
E) we are not getting any better off

Question 5

Over the past 50 years or so:

A) the employment-population ratio always has been rising
B) the employment-population ratio generally has been falling
C) the unemployment-population ratio generally has been rising
D) the employment-population ratio generally has been rising
E) None of these answers are correct.

Question 6

Over the past 50 years or so:

A) the male employment-population ratio always has been rising
B) the female employment-population ratio generally has been falling
C) the male employment-population ratio generally has been rising
D) the female employment-population ratio generally has been rising
E) None of these answers are correct.

Question 7

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. Between January 2012 and January 2013, the unemployment rate ________ and the labor participation rate ________ (rounded to 1 decimal point).

A) rose; fell
B) rose; rose
C) fell; was about the same
D) fell; fell
E) Not enough information is given.

Question 8

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. In January 2013, the unemployment rate was:

A) 92.1 percent
B) 8.6 percent
C) 5.0 percent
D) 57.2 percent
E) 7.9 percent

Question 9

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. In January 2012, the unemployment rate was:

A) 57.0 percent
B) 8.3 percent
C) 91.7 percent
D) 5.3 percent
E) 9.0 percent

Question 10

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. In January 2013, the employment population ratio was:

A) 8.6 percent
B) 58.6 percent
C) 36.4 percent
D) 7.9 percent
E) 63.6 percent

Question 11

Over the course of his or her lifetime, the average American worker will spend ________ hours on the job.

A) 40,000
B) 1 million
C) 90,000
D) 100,000
E) 35,000

Question 12

Refer to the following figure when answering
Figure 7.2: United Kingdom Unemployment Rate: 1971-2012
(Source: OECD and Federal Reserve Economic Data, Federal Reserve Bank of St. Louis)

-Given the unemployment rate data depicted in Figure 7.2, identify the year of the trough of a recession:

A) 1991
B) 2006
C) 1981
D) 1973
E) 1993

Question 13

Refer to the following figure when answering
Figure 7.2: United Kingdom Unemployment Rate: 1971-2012
(Source: OECD and Federal Reserve Economic Data, Federal Reserve Bank of St. Louis)

-Given the unemployment rate data depicted in Figure 7.2, identify the year of the peak of the boom:

A) 1989
B) 1986
C) 1992
D) 2009
E) 1972

Question 14

Refer to the following figure to answer
Figure 7.1: U.S. Unemployment Rate: 1975-2012 (Source: U.S. Bureau of Labor Statistics)

-Using Figure 7.1, which of the following year(s) are the trough of a recession?

A) 1975
B) 1983
C) 1992
D) All of these answers are correct.
E) None of these answers are correct.

Question 15

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. In January 2012, the employment population ratio was:

A) 63.7 percent
B) 8.3 percent
C) 36.3 percent
D) 58.5 percent
E) 9.0 percent

Question 16

Refer to the following figure to answer
Figure 7.1: U.S. Unemployment Rate: 1975-2012 (Source: U.S. Bureau of Labor Statistics)

-Using Figure 7.1, which of the following year(s) are the trough of a recession?

A) 2001
B) 1983
C) 1979
D) 2012
E) All of these answers are correct.

Question 17

Refer to the following table to answer
Table 7.1: U.S. Employment Status (in thousands)
$$\begin{array} { l r r } & \text { Jan 2012 } & \text { Jan 2013 } \\\hline \text { Civilian noninstitutionalized } & & \\\text { population } & 242,269 & 244,663 \\\text { Unemployed } & 12,748 & 12,332 \\\text { Employed } & 141,608 & 143,322 \\\text { Not in Labor Force } & 87,913 & 89,008 \\\hline\end{array}$$

-Consider Table 7.1. Between January 2012 and January 2013, the employment population ratio ________ to/at ________.

A) fell; 58.5 percent
B) rose; 8.3 percent
C) stayed more or less the same; 58.6 percent
D) fell; 7.9 percent
E) rose; 58.6 percent

Question 18

The quote "It's a recession when your neighbor loses his job; it's a depression when you lose yours" is attributed to:

A) Karl Marx
B) Franklin D. Roosevelt
C) John Maynard Keynes
D) Harry S Truman
E) Alan Greenspan

Question 19

Refer to the following figure to answer
Figure 7.1: U.S. Unemployment Rate: 1975-2012 (Source: U.S. Bureau of Labor Statistics)

-Given the unemployment rate data depicted in Figure 7.1, identify the year of the peak of the boom:

A) 1993
B) 2001
C) 1983
D) 2010
E) 1992

Question 20

Generally, during a recession:

A) inflation rises
B) the natural rate of unemployment rises
C) the employment rate rises
D) the unemployment rate rises
E) there is no change in the unemployment rate

Question 21

In the labor market, the intersection of the supply and demand for labor determines:

A) inflation and the real wage
B) the wage and the population, N
C) the interest rate and the unemployment rate
D) the wage and the employment-population ratio, L/N
E) the wage and the number of discouraged workers

Question 22

The labor demand curve slopes downward because:

A) wages are inflexible
B) wages are higher when demand falls
C) of the diminishing marginal product of labor
D) of the income effect
E) None of these answers are correct.

Question 23

Refer to the following figure when answering
Figure 7.3: Labor Market

-In the labor market depicted in Figure 7.3, investment in new physical capital:

A) shifts labor supply from $L _ { 1 } ^ { S }$ to $L _ { 2 } ^ { S }$
B) shifts labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$
C) shifts labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
D) shifts labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$
E) None of these answers are correct.

Question 24

An increase in labor regulations results in:

A) the supply curve shifting left
B) the labor demand curve shifting left
C) the labor supply curve shifting left and the labor demand curve shifting right
D) the labor demand curve shifting right
E) neither the labor supply nor demand curves shifting

Question 25

Most of the total weeks of lost work are accounted for by:

A) retirees
B) people who are discouraged workers
C) people who are incarcerated
D) people who are unemployed for a long period of time
E) None of these answers are correct.

Question 26

Any institutional fixed wage set above the equilibrium wage is called:

A) the market wage
B) the minimum wage
C) a wage rigidity
D) a real rigidity
E) a wage ceiling

Question 27

If the income taxes on wages increase, the labor supply curve will shift left, but what happens to the unemployment rate?

A) It unambiguously falls because the labor participation rate changes.
B) It unambiguously falls because some workers drop out of the workforce.
C) It unambiguously rises because some workers drop out of the workforce.
D) It is ambiguous because some workers drop out of the workforce.
E) None of these answers are correct.

Question 28

Refer to the following figure when answering
Figure 7.3: Labor Market

-In the labor market depicted in Figure 7.3, an increase in the income tax would result in:

A) a shift in labor supply from $L _ { 1 } ^ { S }$ to $L _ { 2 } ^ { S }$
B) a shift in labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$
C) a shift in labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
D) no change in either the labor supply or demand curves
E) None of these answers are correct.

Question 29

A decrease in the income tax will result in:

A) the labor demand curve shifting right
B) the labor demand curve shifting left
C) the labor supply curve shifting left and the labor demand curve shifting right
D) the labor supply curve shifting right
E) neither the labor supply nor demand curves shifting

Question 30

The explanation for the upward sloping supply of labor curve is that:

A) the marginal product of capital is positive
B) as the wage rises, the opportunity cost of leisure rises, so people work more
C) as the wage rises, people want to work less
D) the marginal product of labor is diminishing
E) None of these answers are correct.

Question 31

The demand for labor curve is:

A) downward sloping
B) derived from the firm's profit maximization problem
C) equal to the marginal product of labor
D) derived from the marginal product of labor
E) All of these answers are correct.

Question 32

A drawback of unemployment benefits is that:

A) they increase job destruction
B) they cost taxpayers over 50 percent of their incomes
C) the payments are too large
D) they always lengthen the time spent unemployed
E) they give workers a disincentive to find work

Question 33

Because of the dynamics of the workforce, for example, whether workers become discouraged when there are changes in the economy:

A) the unemployment rate is not necessarily an accurate gauge of the labor market
B) the unemployment rate is a precise gauge of the labor market
C) tone should only consider the employment population ratio rather than the unemployment rate
D) at times the labor demand curve is upward sloping
E) None of these answers are correct.

Question 34

An increase in the income taxes on wages results in:

A) the labor demand curve shifting left
B) the labor supply curve shifting left
C) the labor supply and demand curves shifting left
D) the labor demand curve shifting right
E) neither the labor supply nor demand curves shifting

Question 35

Refer to the following figure when answering
Figure 7.3: Labor Market

-In the labor market depicted in Figure 7.3, an increase in the income tax would result in:

A) a shift in labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$
B) a shift in labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$
C) a shift in labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
D) a shift in labor supply from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
E) None of these answers are correct.

Question 36

Refer to the following figure when answering
Figure 7.3: Labor Market

-In the labor market depicted in Figure 7.3, an increase in oil prices:

A) shifts labor demand from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$
B) shifts labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$
C) shifts labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
D) produces no change in either the labor supply or demand curves
E) None of these answers are correct.

Question 37

Refer to the following figure when answering
Figure 7.3: Labor Market

-In the labor market depicted in Figure 7.3, a decrease in labor regulation:

A) shifts labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$
B) shifts labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$
C) shifts labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$
D) shifts labor supply from $L _ { 1 } ^ { S }$ to $L _ { 2 } ^ { S }$
E) None of these answers are correct.

Question 38

The unemployment rate is defined as:

A) the ratio of all adults not working to the total population
B) the ratio of unemployed to employed members of the labor force
C) the ratio of unemployed members of the labor force to the total labor force
D) the ratio of discouraged workers to the total population
E) the ratio of unemployed members of the labor force to the total population

Question 39

Historically, for most Americans, the length of unemployment is:

A) usually more than one year
B) usually more than three months
C) usually less than three months
D) indefinite
E) less than one week

Question 40

The net change in employment is:

A) new jobs
B) the difference between job creation and job destruction
C) called job creation
D) the unemployment rate
E) the labor force participation rate

Question 41

Conventional wisdom is that most of the natural rate of unemployment is due to:

A) bad fiscal policy
B) frictional unemployment
C) cyclical unemployment
D) structural unemployment
E) bad monetary policy

Question 42

Unemployment is given by ________ and the natural rate of unemployment is ________.

A) Frictional + Structural + Cyclical unemployment; Frictional + Structural unemployment
B) Frictional + Structural - Cyclical unemployment; Frictional + Structural unemployment
C) Frictional + Cyclical unemployment; Frictional + Cyclical unemployment
D) Structural + Cyclical unemployment; Structural unemployment
E) Cyclical unemployment; Frictional + Structural unemployment

Question 43

The cause(s) of increased female participation in the labor market is/are:

A) changing social norms
B) technological changes in managing fertility
C) increased discrimination
D) the baby boom
E) All of these answers are correct.

Question 44

The natural rate of unemployment is decomposed into:

A) cyclical and frictional unemployment
B) structural and seasonal unemployment
C) structural and frictional unemployment
D) seasonal and frictional unemployment
E) structural, frictional, and seasonal unemployment

Question 45

The rise in the employment-population ratio largely is due to:

A) a shrinking U.S. population
B) more teenagers entering the labor force
C) more women entering the labor force
D) an increase in immigrant workers
E) It is unexplained.

Question 46

Refer to the following figure when answering
Figure 7.4: Labor Market

-Consider the labor market depicted in Figure 7.4. Wage, $\bar { w }$ , is called ________ and ________ unemployment.

A) a wage ceiling; does nothing to
B) a wage rigidity; increases
C) the market wage; does nothing to
D) the market wage; increases
E) a wage rigidity; decreases

Question 47

If the minimum wage is set below the equilibrium market wage:

A) it increases unemployment
B) it is effective and reduces unemployment
C) it equals the black market wage
D) it is lower than firms are willing to pay for labor
E) None of these answers are correct.

Question 48

One consequence of wage rigidity is:

A) lower rates of unemployment
B) less labor market volatility
C) labor market stability
D) a lower unemployment rate
E) None of these answers are correct.

Question 49

The natural rate of unemployment is the unemployment rate that would prevail:

A) if inflation is zero
B) if there are no discouraged workers
C) if the economy were in neither a boom nor a recession
D) during seasonal changes in the economy
E) if the unemployment rate is zero

Question 50

Refer to the following table when answering
Table 7.2
$$\begin{array} { c c c c } \hline & \begin{array} { c } \text { Separation } \\\text { rate }\end{array} & \begin{array} { c } \text { Finding } \\\text { rate }\end{array} & \begin{array} { c } \text { Labor } \\\text { force }\end{array} \\\hline 2015 & 2 \% & 20 \% & 130 \\2016 & 2.5 \% & 15 \% & 100 \\\hline\end{array}$$

-Consider the data in Table 7.2. Using the "bathtub model" of unemployment, in 2015 the natural rate of unemployment is:

A) 19.6 percent
B) 10.0 percent
C) 9.1 percent
D) 0.2 percent
E) 90.9 percent

Question 51

Structural unemployment is the unemployment that results from:

A) workers leaving the labor force
B) workers changing jobs in a dynamic economy
C) workers losing jobs during seasonal changes
D) workers losing jobs during recession
E) prevailing labor market institutions

Question 52

Wage rigidity:

A) helps the labor market achieve equilibrium
B) prevents the capital market from realizing equilibrium
C) prevents the labor market from realizing equilibrium
D) prevents unemployment
E) None of these answers are correct.

Question 53

Refer to the following figure when answering
Figure 7.4: Labor Market

-Consider the labor market depicted in Figure 7.4. Wage, $\bar { w }$ , is called ________ and ________.

A) wage rigidity; reduces unemployment
B) wage rigidity; decreases labor market volatility
C) a flexible wage; increases labor market volatility
D) wage rigidity; increases labor market volatility
E) the market wage; increases unemployment

Question 54

The gradual rise in unemployment in the 1960s and 1970s, in part, is explained by:

A) the Vietnam War
B) increased female participation in the labor force
C) the baby boomers
D) All of these answers are correct.
E) None of these answers are correct.

Question 55

Refer to the following table when answering
Table 7.2
$$\begin{array} { c c c c } \hline & \begin{array} { c } \text { Separation } \\\text { rate }\end{array} & \begin{array} { c } \text { Finding } \\\text { rate }\end{array} & \begin{array} { c } \text { Labor } \\\text { force }\end{array} \\\hline 2015 & 2 \% & 20 \% & 130 \\2016 & 2.5 \% & 15 \% & 100 \\\hline\end{array}$$

-Consider the data in Table 7.2. Using the "bathtub model" of unemployment, in 2016 the natural rate of unemployment is:

A) 14.3 percent
B) 14.6 percent
C) 0.2 percent
D) 85.7 percent
E) 16.7 percent

Question 56

Frictional unemployment is the unemployment that results from:

A) workers losing jobs during recession
B) workers losing jobs during seasonal changes
C) workers changing jobs in a dynamic economy
D) prevailing labor market institutions
E) workers leaving the labor force

Question 57

Refer to the following table when answering
Table 7.2
$$\begin{array} { c c c c } \hline & \begin{array} { c } \text { Separation } \\\text { rate }\end{array} & \begin{array} { c } \text { Finding } \\\text { rate }\end{array} & \begin{array} { c } \text { Labor } \\\text { force }\end{array} \\\hline 2015 & 2 \% & 20 \% & 130 \\2016 & 2.5 \% & 15 \% & 100 \\\hline\end{array}$$

-Consider the data in Table 7.2. In ________ the natural rate of unemployment was the higher of the two years at ________ percent.

A) 2016; 14.3
B) 2015; 9.1
C) 2015; 16.7
D) 2016; 10
E) 2015; 14.3

Question 58

Cyclical unemployment is the unemployment that results from:

A) prevailing labor market institutions
B) workers losing jobs during recession
C) workers changing jobs in a dynamic economy
D) workers losing jobs during seasonal changes
E) workers leaving the labor force

Question 59

The "natural rate of unemployment" is the unemployment rate that would prevail:

A) during changes in the business cycle
B) if the economy were in neither a boom nor a recession
C) if people voluntarily leave work
D) during seasonal changes in the economy
E) if the unemployment rate were zero

Question 60

One possible explanation for a high steady-state level of unemployment is:

A) the existence of a small number of institutional restrictions
B) a shrinking labor force
C) perfectly flexible wages
D) a high job separation rate
E) a rising job finding rate

Question 61

Of the richest countries, ________ work the most hours per week.

A) Germans
B) Americans
C) the Japanese
D) Canadians
E) Australians

Question 62

What was the amount that ________ offered to his workers per day?

A) Andrew Carnegie; $1
B) Donald Trump; $500
C) Henry Ford; $5
D) Franklin D. Roosevelt; $10
E) John D. Rockefeller; $20

Question 63

________ historically has generally had the lowest unemployment rate since 1960.

A) The United States
B) Japan
C) France
D) The United Kingdom
E) Germany

Question 64

In the 1960s, European unemployment rates were ________ as/compared to the United States and now are ________.

A) much higher; much higher
B) much lower; about the same
C) much lower; much higher
D) about the same; much lower
E) None of these answers are correct.

Question 65

The percentage of total hours worked by the supply of college-educated workers compared to the percentage of total hours worked by high school-educated workers has been:

A) constant
B) climbing steadily to about 20 percent
C) falling steadily to about 50 percent
D) climbing steadily to about 50 percent
E) None of these answers are correct.

Question 66

In the "bathtub model" of unemployment, in the steady state:

A) employment is constant
B) the change in unemployment is zero
C) the natural rate of unemployment rate is zero
D) cyclical unemployment equals frictional unemployment
E) the job separation rate is zero

Question 67

Europe's relatively high unemployment rates can be attributed to:

A) adverse shocks
B) inefficient labor market institutions
C) strong labor unions
D) generous unemployment insurance
E) All of these answers are correct.

Question 68

You win the lottery, which pays $1 million in 20 annual $50,000 payments. Your friends ask how much that would be if you received a single lump sum payment today. You do not have your calculator, but you show them the following equation to help them solve it themselves, assuming the interest rate is 10 percent:

A) $\mathrm { PV } = \$ 50,000 \sum _ { T _ { - 0 } } ^ { 20 } [ 1 / ( 0.10 ) ] ^ { t }$
B) $P V = \$ 50,000 \times \frac { 1 - [ 1 / ( 0.10 ) ] ^ { 20 } } { 1 - 1 / ( 0.10 ) }$
C) $P V = ( 50,000 \times 20 ) / ( 0.10 )$
D) $\mathrm { PV } = \$ 50,000 \sum _ { t = 0 } ^ { 20 } ( 0.10 ) ^ { t }$
E) $\mathrm { PV } = \$ 1,000,000 / .1$

Question 69

The idea that you value receiving $1,000 today more than in 10 years in the future is called:

A) real rate of return
B) compound interest
C) present discounted value
D) utility maximization
E) intertemporal substitution

Question 70

According to data presented in the text, the country with the lowest number of working hours per week from 1993-1996 was:

A) Italy
B) Japan
C) Canada
D) the United Kingdom
E) the United States

Question 71

Refer to the following figure when answering
Figure 7.5: Labor Market

-Consider Figure 7.5. Given what we know about the number of hours worked by college graduates and the wage premium received by college graduates, which equilibrium in the figure characterizes these empirical observations, on average?

A) the intersection of $L _ { 1 } ^ { D }$ and $L _ { 1 } ^ { S }$
B) the intersection of $L _ { 1 } ^ { D }$ and $L _ { 2 } ^ { S }$
C) the intersection of $L _ { 2 } ^ { D }$ and $L _ { 2 } ^ { S }$
D) the intersection of $L _ { 2 } ^ { D }$ and $L _ { 1 } ^ { S }$
E) None of these answers are correct.

Question 72

In the "bathtub model" of unemployment, the key equation is:

A) $\bar { L } = U _ { t } - E _ { t }$
B) $\bar { s } E _ { t } = \bar { f } U _ { t }$
C) $\bar { s } E _ {t } = \bar { f } \bar { L }$
D) $\bar { f } E _ { t } = \bar { s } U _ { t }$
E) $\bar { s } E _ { t } = ( 1 - \bar { f } ) U _ { t }$

Question 73

Refer to the following figure when answering
Figure 7.5: Labor Market

-Consider Figure 7.5. Given what we know about the difference between college- and high school educated-workers, which equilibrium characterizes the college graduate experience, on average?

A) the intersection of $L _ { 1 } ^ { D }$ and $L _ { 2 } ^ { S }$
B) the intersection of $L _ { 1 } ^ { D }$ and $L _ { 1 } ^ { S }$
C) the intersection of $L _ { 2 } ^ { D }$ and $L _ { 2 } ^ { S }$
D) the intersection of $L _ { 2 } ^ { D }$ and $L _ { 1 } ^ { S }$
E) None of these answers are correct.

Question 74

Consider the simplified payment system for the victims of 9/11:
• The family of a 65-year-old service worker earning $10,000 a year receives $300,000 in compensation.
• The family of a 30-year-old bond trader earning $175,000 a year receives $4.35 million.
Which statement most accurately describes the difference in the payments between the service worker and the bond trader?

A) The present value of the bond trader's lifetime income is greater than the service worker's.
B) Because of her age, the bond trader had less savings to rely on, so her family received more compensation.
C) The future value of the bond trader's lifetime income is less than the service worker's.
D) Such a discrepancy in compensation would never be the case.
E) None of these answers are correct.

Question 75

By 2005, the college wage premium was about ________ than the wage of the typical worker with a high school education.

A) 50 percent more
B) 10 percent more
C) 100 percent more
D) 90 percent more
E) None of these answers are correct.

Question 76

The equation $\$ 386 = \$ 1,000 / ( 1.1 ) ^ { 10 }$ means you:

A) would prefer to receive $386 today rather than $1,000 in 10 years
B) are indifferent between receiving $386 today and $1,000 in 10 years
C) would prefer to receive $1,000 in 10 years rather than $386 today
D) are indifferent between receiving $386 today and $1,000 in 100 years
E) Not enough information is given.

Question 77

Beginning in ________, the wage premium began ________.

A) 1980; slowing down
B) 1980; accelerating
C) 1963; trending down
D) 1970; accelerating
E) 1970; rising

Question 78

Refer to the following figure when answering
Figure 7.5: Labor Market

-Consider Figure 7.5. If the demand curve for college graduates is characterized by $L _ { 2 } ^ { D }$ , which of the following describes why the demand for labor for college graduates is higher than that for high school students, characterized by $L _ { 1 } ^ { D }$
?

A) There is a growing number of college graduates.
B) There are fewer college graduates than high school graduates.
C) College graduates have a higher marginal product.
D) College graduates are smarter than high school graduates.
E) None of these answers are correct.

Question 79

A key reason that unemployment in the United States is so low compared to most of Europe is because of:

A) no cyclical unemployment
B) low frictional unemployment
C) high structural unemployment
D) low structural unemployment
E) no structural unemployment

Question 80

Which of the following is not a potential reason for offering a wage above the market wage?

A) A higher wage contributes to improved worker health.
B) A higher wage makes the opportunity cost of losing a job higher, thus reducing "shirking."
C) It reduces moral hazard.
D) Higher wages attract more productive workers.
E) Higher wages signal prestige and thus attract workers from elite schools.