Econ 2030 Chapter 6

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) all of the above c) none of the above d) unemployment benefits c) the extent to which firms mark up prices over their marginal cost

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

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) A b) 1/A c) N/Y d) 1/N

a) A

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) an upward sloping line. b) a downward sloping line. c) a curve that first slopes upward, then downward. d) a vertical line. e) a horizontal line.

a) an upward sloping line.

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 exactly 5%. b) the nominal wage will increase by less than 5%. c) the real wage will increase by less than 5%. d) the real wage will increase by 5%. e) the nominal wage will increase by more than 5%

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

Use the information provided below to answer the following questions. The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the unemployment rate is a) 11.1% b) 9.1%. c) 10%. d) 4%. e) 6.6%.

b) 9.1%.

Based on price setting behavior, we know that an increase in the unemployment rate will cause a) an upward shift of the PS curve. b) no change in the real wage. c) a reduction in the real wage. d) an increase in the real wage

b) no change in the real wage.

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

b) none of the above

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) P. b) W. c) 1. d) none of the above e) W/P.

c) 1.

Suppose the actual unemployment rate increases. This will cause a) none of the above b) an upward shift in the WS curve. c) a movement along the WS and the PS curves. d) an upward shift in the PS curve. e) a downward shift in the WS curve.

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

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) no change in the natural level of output. c) a reduction in the natural level of output. d)an increase in the natural level of employment.

c) a reduction in the natural level of output.

The natural level of employment (N) will increase when which of the following occurs? a) an increase in the actual unemployment rate b) none of the above c) a reduction in unemployment benefits d) an increase in the markup of prices over costs e) all of the above

c) a reduction in unemployment benefits

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) a reduction in the natural rate of unemployment. b) both B and C c) an increase in the equilibrium real wage. d) a reduction in the equilibrium real wage.

c) an increase in the equilibrium real wage.

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 unemployment rate is zero. c) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations. d) the markup (m) is zero. e) there are no discouraged workers in the economy.

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

Labor productivity is represented by which of the following? a) capital per worker b) the ratio of output to the labor force c) the ratio of output to employment d) workers per unit of capital e) the ratio of output to population

c) the ratio of output to employment

In the wage-setting relation, the nominal wage tends to decrease when a) the price level increases. b) all of the above c) unemployment benefits decrease. d) the unemployment rate decreases. e) the minimum wage increases.

c) unemployment benefits decrease.

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) a reduction in the natural level of employment. 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 output

d) an increase in the natural level of output

Which of the following is considered out of the labor force? a) those individuals who have started searching for employment for the first time b) those who worked full time, but in a family business c) those temporarily laid off who will soon be recalled d) none of the above e) the unemployed

d) none of the above

Use the information provided below to answer the following questions. The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the labor force participation rate is a) 90.1%. b) 36%. c) 40%. d) 66%. e) 44%

e) 44%

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) a downward shift in the WS curve b) an upward shift in the WS curve c) none of the above d) a downward shift in the PS curve e) an upward shift in the PS curve

e) an upward shift in the PS curve

Which of the following individuals would be considered unemployed? a) an individual who is not working and is not looking for work b) all of the above c) an individual who works only part-time d) an individual who works full-time in a family business, but is not paid e) none of the above

e) none of the above