Employment and Unemployment
The value of the marginal product of the tenth worker hired by a firm is $50. What is the maximum wage that should be paid to the worker?
$50
Scenario: Suppose that professors pay their teaching assistants $10 an hour to grade papers for their classes, and then the professors sell the graded papers back to the students in their classes for $.75 a paper. The following table shows the number of papers graded in a given number of hours. Hours of Labor Number of Papers Graded 1 40 2 75 3 105 4 130 5 142 6 149 7 154 What is the value of the marginal productivity of labor of the fifth hour of labor
$9
Structural unemployment can be caused by ____________
-labor unions -efficiency wages
The equation for the labor force participation rate labor force participation rate is defined as ____________.
100 x labor force/potential workers
which of these persons is offically unemployed?
A non-working individual who has looked for a job in the past week
Which of the following is an example of what economists refer to as job search?
A. An individual that engages in the job hunt by determining who is hiring and how much they pay. B. A person who applies for a high-paying job but does not qualify, so she begins searching for an appropriate position. C. People that engage in the job hunt by sending out resumes
Frictional unemployment can result when ____________.
A. firms and workers have imperfect information about each otherfirms and workers have imperfect information about each other. Your answer is correct. C. it takes time for firms to find applicants with the right skills and experienceit takes time for firms to find applicants with the right skills and experience. Your answer is correct. D. firms and workers have imperfect information about the state of the economyfirms and workers have imperfect information about the state of the economy.
Structural unemployment is the unemployment that arises____________
B. when wage rigidity creates a persistent gap between labor supply and labor demand when wage rigidity creates a persistent gap between labor supply and labor demand.
The period from 2007 to 2009 was a time of economic contraction that came to be known as the "Great Recession." During periods of recession, most firms experience a decline in demand for their product, as well as a decline in the product's equilibrium price. All other things being equal, macroeconomic theory predicts that the wage of most workers should decline in recessionary periods. However, this was not the case in the Great Recession, or during many other economic downturns throughout recent history. Based on the discussion in the chapter, explain why this might be so, and what the implications are for unemployment.
During downturns workers are resistant to the lowering of wages and firms try to avoid doing so. This downward wage rigidity keeps the quantity of labor supplied greater than demand, causing unemployment.
Which of the following groups of people would not be considered employed?
Housewives raising kids at home
In February 2014, the United States added 175,000 jobs to the economy. Given this information, what can we say about the unemployment rate of the country?
It may increase, decrease, or not change depending on how many people started searching for jobs during the month.
Out of the following people, who is not considered a potential worker?
Joe, who is currently serving a prison sentence for robbery
What is the correct expression for calculating the Labor Force Participation Rate?
Labor Force Participation Rate = 100% * [(Employed+ Unemployed)/Potential Workers]
Which of the following people are counted as potential workers?
People who are already employed full-time
Which of the following would be classified as unemployed?
Someone who is not working and looked for work two weeks ago
Which of the following is not true regarding the natural rate of unemployment?
The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession
In April 2012, the Bazanian Daily, a leading newspaper in the country of Bazania, carried a report titled "20,000 jobs added in the last quarter; unemployment rate shoots up from 5 percent to 6.7 percent." How could the unemployment rate in Bazania increase even when new jobs were created?
The new jobs may have made discouraged workers optimistic enough to start applying for jobs, thus re-entering the labor force and being counted as unemployed, which causes the overall unemployment rate to increase
Suppose that in January there were 6 comma 000 comma 0006,000,000 workers in the labor force, with 5 comma 604 comma 0005,604,000 employed and 396 comma 000396,000 unemployed, implying a 6.6 percent unemployment rate. A month later, there were 6 comma 200 comma 0006,200,000 workers in the labor force, with 5 comma 779 comma 0005,779,000 employed and 421 comma 000421,000 unemployed. (Notice the number employed went from 5 comma 604 comma 0005,604,000 to 5 comma 779 comma 0005,779,000, an increase of 175,000.)
The unemployment rate in February is 6.796.79%.
Which of the following statements is true?
There always exists some amount of unemployment in an economy
What will happen to the demand curve for workers in steel mills if some technology that increases their productivity is introduced, assuming all else equal?
There will be a right shift of the demand curve for the workers
The graph on the right shows a labor market in equilibrium. The equilibrium wage is $10 per hour. At this wage, there are people who are not working, which is represented by the segment of the labor supply curve above the equilibrium wage. Why are these people not working in this market?
These people are only willing to work for wages above the market-clearing wage
What is the correct expression for calculating the unemployment rate?
Unemployment rate = 100% * [Unemployed/ (Employed+ Unemployed)]
What is the appropriate label for the yminus−axis?
Wage rate
Let VMPL equal the value of the marginal product of labor and W equal the wage rate. When should a firm hire more workers to increase profit?
When VMPL > W
Which of the following best explains why the labor supply curve slopes upward
When wages increase, the opportunity cost of not working increases, leading people to seek more work hours
In a recent study for the National Bureau of Economic Research (NBER), four researchers looked at the effect of generous unemployment benefits on the local unemployment rate. They compared the unemployment situation in adjoining counties, which happened to lie in two different states that had different laws regarding the amount and duration of unemployment benefits. (Re-read the section on "A Natural Experiment of History" in Chapter 8 of the text to understand how the NBER research is based on a "natural experiment.") The authors of the NBER study found that the unemployment rate "rises dramatically in the border counties belonging to the states that expanded unemployment benefit duration" during the Great Recession. Why might this be so? Based on Hagedorn, Karahan, et al., "Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects." NBER working paper 19499, October 2013
With the longer duration of unemployment benefits, firms needed to keep wages high to attract people to work. This caused downward wage rigidity, leading to persistent higher unemployment.
A change in which of these factors would cause a movement along the supply curve for labor rather than a shift of the labor supply curve?
a change in the wage
Which of these factors will not cause the demand curve for labor to shift?
a change in wage
Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.
a discouraged worker
If the current wage is above the market clearing-wage, there is __________ in the labor market.
a surpus of labor
Which of the following factors does not cause a shift in the labor demand curve?
changes in wage rate
The goal of a country with a healthy economy is to have ____________ equal to zero
cyclical unemployment
At full employment, __________.
cyclical unemployment is zero
If the labor demand is unchanged, an increase in the labor supply will __________ the equilibrium wage and __________ the number of workers employed.
decrease, increase
As the number of workers increases, the marginal product of labor __________ and the marginal revenue product of labor __________.
decreases, decreases
Which of these factors can cause the natural rate of unemployment to change?
demographic changes
Workers who are unemployed but are not actively looking for jobs are referred to as ________
discouraged workers
As the wage increases, the demand for labor curve:
does not shift, but the quantity demanded for labor decreases
This results in a labor demand curve that is
downward sloping
The labor market may take a long time to adjust to economic growth due to __________
excess capacity in production
When the economy is at full employment, which types of unemployment remain?
frictional and structural
The short-term unemployment that arises from workers, in the process of changing jobs, is called _________
frictional unemployment
What type of unemployment does job search lead to?
frictional unemployment
Scenario: Jim, Pam, Michael, and Angela all worked for a paper company until the company went out of business. Jim was a salesman, Pam was a receptionist, Michael was the manager, and Angela was an accountant. Once the company went out of business, they all had to look for and consider other work opportunities. While these individuals are looking for other work, what type of unemployed are the
frictionally unemployed
The "normal or natural" underlying level of unemployment in the economy is the __________.
full employment rate of unemployment
Potential workers are classified as being unemployed when ____________.
hey do not have a paid job, have looked for work in the previous 4 weeks, and are available for work
Unemployment statistics are measured and released by the Bureau of Labor Statistics (BLS), a division of the U.S. Department of Labor. The BLS officially classifies a person as being employed ____________.
if that person holds either a part-time or full-time paid job.
The US data on the unemployment rate since 1948 shows that the unemployment rate tends to ________during_________
increase, recessions
Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?
increasing minimum age
Any change that causes a decrease in the demand for labor at a given wage rate will be represented by a(n) ________ the labor demand curve, assuming all else equal
left shift of
The value of the marginal product of labor is the ____________.
market value of a worker's additional output for a firm
Explain whether each of these individuals will be counted as a part of the labor force. Alex recently retired after working for the same company for 30 yearsrecently retired after working for the same company for 30 years. John is a full minus time stay minus at minus home parent while his wife worksis a full−time stay−at−home parent while his wife works. We know that Alex is ____________, and we know that John is ____________.
not in the labor force; not in the labor force.
The size of the labor force in a country is equal to the ________
number of employed workers plus the number of unemployed workers in the country
The labor force equation is equal to the number employed________the number unemployed.
plus
Which of the following does not cause the labor supply curve to shift?
shifts in the labor demand curve that cause a change in the wage rate
As technology improves, the demand for labor curve:
shifts to the right
As the population increases, the labor supply curve:
shifts to the right
As the price of the final product increases, the demand for labor curve:
shifts to the right
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.
structural unemployment
Increases in the minimum wage will increase __________.
teenage unemployment
which of these groups is included in the labor force?
the unemployed
fricitional unemployment
the unemployment which exists in any economy due to people being in the process of moving from one job to another.
Which of the following is the equivalent of the demand curve for labor?
the value of marginal product of labor
A profitminus−maximizing firm will pay a worker ________.
the value of the worker's marginal product
A downward movement along the labor demand curve occurs when ________, assuming all else equal.
the wage rate decreases
the natural rate of unemployment is the ___________
unemployment rate that results when the economy produces the potential level of real GDP
If the minimum wage is set above the market-determined clearing wage, the __________.
unemployment rate will be higher than it would be without a minimum wage
structural unemployment
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves
Firms should hire workers until the ____________.
value of the marginal product of labor is at least as great as the wage paid
The labor demand curve represents the relationship between the quantity of labor demanded and the ________.
wage
The labor demand curve shows the quantity of labor demanded will decrease as
wages increase
Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of $600 per day. He knows that if he hires another worker, he would have to pay that worker $50 per day and the company would earn revenue of $680 per day if the new worker is hired. Determine the value of the marginal product of labor of the employee that Anthony is considering hiring
$80
Sometimes new technology in production reduces the time that a worker takes to complete a task. Technological innovations can also completely replace a factory worker. Does this mean that technological progress will lead to large-scale unemployment
No, some sectors may experience unemployment as a result of the innovations but overall productivity and incomes will increase, leading to more employment opportunities.
Scenario: The unemployment rate in Country Y is 6 percent, and the labor force is equals about 200 million people. Who is considered part of the 6 percent of unemployed workers in Country Y?
Peter, an engineer who became a stayminus−atminus−home husband after his startminus−up company went bankrupt, but he wants to find a new engineering job
