ECN 4020 - Chapter 6: The Labor Market

4) Based on the information above, the non-employment rate is A) 4%. B) 9.1%. C) 10%. D) 60%. E) 66%

D) 60%.

57) Today, about ________ of U.S. workers have their wages set by collective bargaining agreements. A) 10% B) 15% C) 20% D) 25%

A) 10%

48) Based on our understanding of the labor market model presented in Chapter 6, we know that an increase in the minimum wage will cause A) an increase in the equilibrium real wage. B) a reduction in the equilibrium real wage. C) a reduction in the natural rate of unemployment. D) both B and C

A) an increase in the equilibrium real wage.

50) Based on our understanding of the labor market model presented in Chapter 6, we know that a reduction in the markup will cause A) an increase in the equilibrium real wage. B) a reduction in the equilibrium real wage. C) an increase in the natural rate of unemployment. D) a reduction in the natural rate of unemployment and no change in the real wage.

A) an increase in the equilibrium real wage.

52) For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 6, we know that a reduction in the markup will cause A) an increase in the natural level of output. B) a reduction in the natural level of output. C) no change in the natural level of output. D) a reduction in the natural level of employment.

A) an increase in the natural level of output.

45) An increase in the minimum wage will tend to cause which of the following? A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above

A) an upward shift in the WS curve

41) Based on price setting behavior, we know that a reduction in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve.

A) no change in the real wage.

54) Based on price setting behavior, we know that an increase in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve.

A) no change in the real wage.

47) With the real wage on the vertical axis and employment (N) on the horizontal axis, we know that A) the WS curve is upward sloping. B) the WS curve is downward sloping. C) the PS curve is upward sloping. D) the PS curve is downward sloping.

A) the WS curve is upward sloping.

19) Labor productivity is represented by which of the following? A) the ratio of output to employment B) workers per unit of capital C) capital per worker D) the ratio of output to population E) the ratio of output to the labor force

A) the ratio of output to employment

27) The labor force is defined as A) the sum of the employed and unemployed. B) the total number employed. C) the total number of working age individuals in the population. D) the sum of the number of employed, unemployed and discouraged individuals.

A) the sum of the employed and unemployed.

23) Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting relation will now be A) a vertical line. B) a horizontal line. C) an upward sloping line. D) a downward sloping line. E) kinked at the natural rate of unemployment.

Answer: B

42) Suppose the aggregate production function is given by the following: Y = AN. Given this information, we know that labor productivity is represented by the following: A) 1/A B) A C) 1/N D) N/Y

B) A

44) A reduction in unemployment benefits will tend to cause which of the following? A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above

B) a downward shift in the WS curve

56) A reduction in the minimum wage will tend to cause which of the following? A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above

B) a downward shift in the WS curve

49) Based on our understanding of the labor market model presented in Chapter 6, we know that an increase in the markup will cause A) an increase in the equilibrium real wage. B) a reduction in the equilibrium real wage. C) a reduction in the natural rate of unemployment. D) both B and C

B) a reduction in the equilibrium real wage.

51) For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 6, we know that an increase in the minimum wage will cause A) an increase in the natural level of output. B) a reduction in the natural level of output. C) no change in the natural level of output. D) an increase in the natural level of employment.

B) a reduction in the natural level of output.

53) Based on wage setting behavior, we know that an increase in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the WS curve.

B) a reduction in the real wage.

25) The natural level of employment (N) will increase when which of the following occurs? A) an increase in the markup of prices over costs B) a reduction in unemployment benefits C) an increase in the actual unemployment rate D) all of the above E) none of the above

B) a reduction in unemployment benefits

33) In the United States, the average length of time people spend unemployed is A) approximately one month B) between two and three months C) between ten and eleven months D) greater than twelve months

B) between two and three months

12) Which of the following statements about wage setting is true? A) most workers in the U.S. have their wages set by formal contracts. B) formal contracts play a more important role in Japan and Western Europe than in the United States. C) the minimum wage in the U.S. is about 75% of the average wage. D) all of the above

B) formal contracts play a more important role in Japan and Western Europe than in the United States.

8) Which of the following variables is most directly determined in the labor market? A) stock prices B) nominal wages C) interest rates D) all of the above E) none of the above

B) nominal wages

14) Efficiency wage theory suggests that A) workers will be paid less than their reservation wage. B) productivity might drop if the wage rate is too low. C) the government can only set tax rates so high before people will prefer not to work. D) unskilled workers will have a lower turnover rate than skilled workers. E) firms will be more resistant to wage increases as the labor market tightens.

B) productivity might drop if the wage rate is too low.

39) With the real wage on the vertical axis and the unemployment rate on the horizontal axis, we know that A) the WS curve is upward sloping. B) the WS curve is downward sloping. C) the PS curve is upward sloping. D) the PS curve is downward sloping.

B) the WS curve is downward sloping.

22) The natural level of output is the level of output that occurs when A) the goods market and financial markets are in equilibrium. B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations. C) the markup (m) is zero. D) the unemployment rate is zero. E) there are no discouraged workers in the economy.

B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations.

36) Suppose workers and firms expect the overall price level to increase by 5%. Given this information, we would expect that A) the nominal wage will increase by less than 5%. B) the nominal wage will increase by exactly 5%. C) the nominal wage will increase by more than 5%. D) the real wage will increase by 5%. E) the real wage will increase by less than 5%.

B) the nominal wage will increase by exactly 5%.

35) When the unemployment rate is low, we would expect that A) the probability of losing a job is high. B) the probability of losing a job is low. C) the probability an unemployed individual will find another job is low. D) the separation rate will increase.

B) the probability of losing a job is low.

20) The price setting equation is represented by the following: P = (1+m)W. When there is perfect competition, we know that m will equal A) W. B) P. C) 1. D) W/P. E) none of the above

C) 1.

3) Based on the information above, the labor force participation rate is A) 36%. B) 40%. C) 44%. D) 90.1%. E) 66%.

C) 44%.

32) In the United States, how many workers become unemployed, on average, every day? A) 5,000 B) 10,000 C) 50,000 D) 100,000

C) 50,000

31) The Current Population Survey interviews approximately how many households each month? A) 5000 B) 10,000 C) 60,000 D) 100,000

C) 60,000

28) The participation rate in the United States in 2010 was approximately equal to A) 96%. B) 90%. C) 65%. D) 26%. E) 5%.

C) 65%.

2) Based on the information above, the unemployment rate is A) 4%. B) 6.6%. C) 9.1%. D) 10%. E) 11.1%

C) 9.1%.

34) A reduction in the unemployment rate will tend to cause which of the following? A) an increase in the separation rate B) a reduction in the nominal wage C) a reduction in the duration that one is unemployed D) none of the above

C) a reduction in the duration that one is unemployed

16) Henry Ford's experiment with efficiency wages resulted in A) a dramatic drop in productivity. B) a dramatic increase in the turnover rate. C) a reduction in the layoff rate. D) new problems with the work force, like drunkenness and reckless driving. E) no noticeable effects.

C) a reduction in the layoff rate.

40) Based on wage setting behavior, we know that a reduction in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the WS curve.

C) an increase in the real wage.

46) Suppose that increased international trade makes product markets more competitive in the U.S. Given this information, we would expect to observe which of the following? A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above

C) an upward shift in the PS curve

55) An increase in unemployment benefits will tend to cause which of the following? A) a downward shift in the WS curve B) an upward shift in the PS curve C) an upward shift in the WS curve D) a downward shift in the PS curve E) none of the above

C) an upward shift in the WS curve

24) Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be A) a vertical line. B) a horizontal line. C) an upward sloping line. D) a downward sloping line. E) a curve that first slopes upward, then downward.

C) an upward sloping line.

26) Based on the data provided in the chapter, which of the following represents the largest component of the labor force? A) discouraged workers B) retired individuals C) employed D) unemployed

C) employed

18) In the wage setting relation W = PeF(u,z), the variable z does NOT include which of the following variables? A) the minimum wage B) unemployment benefits C) the extent to which firms mark up prices over their marginal cost D) all of the above E) none of the above

C) the extent to which firms mark up prices over their marginal cost

29) Which of the following represents the participation rate? A) the ratio of the number employed to the size of the labor force B) the ratio of the number employed to the civilian noninstitutional population C) the ratio of the labor force to the civilian noninstitutional population D) the ratio of the labor force to the total number of employed and unemployed workers

C) the ratio of the labor force to the civilian noninstitutional population

17) In the wage-setting relation, the nominal wage tends to decrease when A) the price level increases. B) the unemployment rate decreases. C) unemployment benefits decrease. D) the minimum wage increases. E) all of the above

C) unemployment benefits decrease.

15) If efficiency wage theory is valid, we would expect a relatively low premium over the reservation wage when A) the unemployment rate is low. B) the job requires very little training. C) workers can be easily monitored. D) workers have few other options for employment in the area. E) all of the above

C) workers can be easily monitored.

43) Suppose the aggregate production function is given by the following: Y = N. Given this information, we know that labor productivity is represented by the following: A) 1/N B) N C) N/Y D) 1

D) 1

38) Suppose the actual unemployment rate increases. This will cause A) an upward shift in the WS curve. B) a downward shift in the WS curve. C) an upward shift in the PS curve. D) a movement along the WS and the PS curves. E) none of the above

D) a movement along the WS and the PS curves.

11) As the unemployment rate falls, A) the proportion of the unemployed finding a job increases. B) the separation rate increases. C) the young and unskilled experience larger-than-average decreases in unemployment. D) both A and C. E) all of the above

D) both A and C.

30) The average amount of time people spend unemployed is approximately A) 1 month. B) 6 months . C) 12 months. D) none of the above

D) none of the above

10) When the Current Population Survey (CPS) was introduced in 1940, it was based on a survey of approximately 8000 households. The CPS survey is now based on a survey of how many households? A) 8,000 B) 10,000 C) 12,0000 D) 20,000 E) 60,000

E) 60,000

7) Data on labor-force flows show that A) in any given month, almost none of the unemployed gets jobs. B) in any given month, almost all of the unemployed gets jobs. C) the average duration of unemployment is about 2 weeks. D) the average duration of unemployment is about 2 years. E) in any given month, about one-fourth of the unemployed get jobs.

E) in any given month, about one-fourth of the unemployed get jobs.

1) Which of the following is considered out of the labor force? A) the unemployed B) those temporarily laid off who will soon be recalled C) those who worked full time, but in a family business D) those individuals who have started searching for employment for the first time E) none of the above

E) none of the above

13) The reservation wage is A) the wage that an employer must pay workers to reduce turnover to a reasonable level. B) the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. C) the lowest wage firms are allowed by law to pay workers D) the wage offer that will end a labor-strike. E) none of the above

E) none of the above

21) The natural rate of unemployment is the rate of unemployment A) that occurs when the money market is in equilibrium. B) that occurs when the markup of prices over costs is zero. C) where the markup of prices over costs is equal to its historical value. D) that occurs when both the goods and financial markets are in equilibrium. E) none of the above

E) none of the above

37) Suppose the actual unemployment rate decreases. This will cause A) an upward shift in the WS curve. B) a downward shift in the WS curve. C) an upward shift in the PS curve. D) a downward shift in the PS curve. E) none of the above

E) none of the above

5) Which of the following individuals would be considered unemployed? A) an individual who works only part-time B) an individual who works full-time in a family business, but is not paid C) an individual who is not working and is not looking for work D) all of the above E) none of the above

E) none of the above

6) Data on labor-force flows show that A) almost all separations are due to death. B) almost all separations are due to serious illness. C) almost all separations are quits. D) almost all separations are layoffs. E) none of the above

E) none of the above

9) The two labor markets in the "dual labor market" are A) southern versus northern. B) western versus eastern. C) English speaking versus non-English speaking. D) domestic versus foreign. E) none of the above

E) none of the above