labor economics test 1 - ch2,3
8. Which of the following would be considered a time-intensive commodity?
) Doing a jigsaw puzzle
Suppose an income-maintenance program offers a basic benefit of $7,500 per year and the benefit-reduction rate is 33 1/3%. The break-even level of income is then
7500/.333 = 22,500
indifference curves
Indifference curves are downward sloping because more is better.
Steven's reservation wage is $12, and his market wage is $11. We can conclude that
Steven will be a nonparticipant in the labor market.
The labor force participation rate of males has:
decreased over the past 60 years.
If U represents the number of unemployed persons, E the number of employed persons, and N the number in the potential labor force that are neither unemployed nor employed, the labor force participation rate can be found as
(U + E)/(U + E + N)
WHAT will cause a movement along a labor supply curve?
An increase in the wage rate
Calculate the break-even level of income for an income maintenance program with a basic benefit of $2,000 and a benefit reduction rate of 20% of earned income.
B = S − tY 0 = 2000 − 0.20Yb 0.20Yb = 2, 000 Yb = 10, 000
Given the data in Table 1, calculate the labor force participation rate total pop = 200m non institutionalize pop 16+ = 140m employed = 120m unemployed = 5m
LFPR = 120+5/140 = .893 = 89.3%
linear regression analysis
Linear regression finds the line that best fits the data by minimizing the sum of the squared residuals.
Assume under an income-maintenance program that the basic benefit (income guarantee) is $9,000 and the benefit-reduction rate is 50%. If a family has an earned income of $3,000 per year, its subsidy payment will be
S = B-t*y : S=9,000-(3,000*.5) = 7500
On a standard income-leisure diagram, Sara has steeper indifference curves than John. This likely reflects the fact that
Sara values leisure more highly compared to income than John does.
sub effect
The substitution effect of a wage increase causes leisure decreases and hours worked increases to because leisure has a greater opportunity cost.
Which one of the following would be most likely to shift the labor supply curve to the right?
a change in the indifference map following an improvement in working conditions
According to the textbook, each of the following factors may have contributed to increased female labor force participation
a desire to maintain household living standards. rising divorce rates. expanding job accessibility.
The convex shape of a standard indifference curve reflects
a diminishing marginal rate of substitution of leisure for income.
Because resources are scarce relative to human wants, economics is best described as
a science of choice.
Research suggests that the widespread use of the birth control pill
accounts for about one-third of the increase in the share of women in professional occupations between 1970 and 1990.
In the context of the basic work-leisure model, "leisure" time includes
any time not devoted to a paying job.
Nobel Laureate Gary Becker's basic professional contribution is his
application of the economic perspective to law, sociology, demographics, and anthropology.
Indifference curves are convex to the origin because
at a lower income, a person is less willing to sacrifice income for additional leisure.
what will increase the likelihood of an individual being a non-participant in the labor market?
availability of substantial non-wage income
Compared to fifty years ago, the labor force participation rate of 25- to 54-year-old men has _____, the participation rate of 55- to 64-year-old men has _____, and the participation rate of men age 65 and over has _____.
been fairly steady; fallen; fallen
Most of the variations in U.S. population growth have resulted from changes in
birthrates and net migration.
In Becker's model of time allocation, the difference between "goods" and "commodities" is that commodities are produced
by combining goods with time.
Until recently, the labor force participation rate of African-American women has _____ the rate of white women. In recent years the labor force participation rate of African-American men has _____ the rate of white men.
consistently exceeded; been slightly less than
Which of the following best exemplifies the Becker income effect? An increase in the market wage leads a household to
consume more commodities.
All else equal, rising real wages will
decrease average weekly work hours if the income effect exceeds the substitution effect.
The "old" view of labor economics stresses _____, while the "new" view focuses upon ____
description; analysis
Empirical evidence suggests that the
discouraged-worker effect dominates the added-worker effect; the participation rate varies inversely with the unemployment rate.
In the years following enactment of welfare reform in 1996, welfare case loads
dropped by more than 50%.
Which one of the following gives rise to a retirement-inducing substitution effect? As workers approach retirement age,
earnings potential decreases so that leisure becomes relatively less costly.
Which of the following best exemplifies the Becker substitution effect? An increase in the market wage leads a household to
eat more fast-food meals.
Nobel Laureate Gary Becker is known for economic theories in all of the following areas
economics of households. investment in human capital. economics of discrimination.
The labor force consists of all persons age 16 years and over who are
employed or are actively seeking employment
Sammy is required by her employer to work a standard eight-hour workday. Suppose her marginal rate of substitution of leisure for income exceeds the wage rate at this level of work effort. We can conclude that Sammy will MRS > wage rate
feel overemployed.
If a worker's wage rate rises
household production will shift away from time-intensive commodities toward goods-intensive commodities.
If a worker's wage rate rises,
household production will shift away from time-intensive commodities toward goods-intensive commodities.
Suppose an individual worker is on the backward-bending portion of her labor supply curve. Then, for a wage increase, the
income effect is stronger than the substitution effect.
The Earned Income Tax Credit
increases the labor force participation rate.
A 10% increase in the wage induces Margy to increase her desired work hours by 2%. Over this range of wages, Margy's wage elasticity of labor supply is
inelastic.
the labor force participation rate
is the fraction of a given population that is classified either as employed or unemployed.
how is the supply of labor different from the supply of a product?
labor is inseparable from the worker
. Due to the income effect of a wage rate increase, an individual finds that a given amount of work generates more income, so that person chooses
more income and more leisure
A 10% increase in the wage induces John to decrease his desired work hours by 1%. Over this range of wages, John's wage elasticity of labor supply is:
negative
For Jenny, the income effect of a wage increase dominates the substitution effect. Jenny's wage elasticity of labor supply is
negative. --> Wage up, inc>sub = neg wage elasticity
For income and leisure time, a higher level of utility is achieved by moving to the _____ on an indifference _____.
northeast; map
income effect isolated change can be seen as
observe the movement from the original optimal position to a point on the final indifference curve with slope equal to the original wage rate, e.g. parallel budget constraint line.
LFPR (Labor Force Participation Rate)
persons employed or seeking unemployment/ potential labor source (anyone over 16 not in jail)
The slope of an indifference curve at any point reflects the
rate at which a person is willing to substitute leisure for income.
Empirical evidence indicates that inheritances _____ labor force participation; further, persons receiving inheritances tend to be _____ likely to work in the years preceding the inheritance.
reduce; less
The three basic characteristics of the economic perspective are
relative scarcity, purposeful behavior, and adaptability.
Because scarcity forces people to make purposeful choices, labor market participants
respond to changes in perceived costs and benefits.
Since the mid-1980s, the labor force participation rate of women has _____ and the participation rate of men has _____.
risen; fallen.
The decrease in the length of the average workweek between 1910 and World War II is most likely attributable to .
rising real wages and earnings
In an income-leisure diagram, the wage rate is graphically represented by the
slope of the budget line.
The optimal work-leisure position is achieved where
the MRS L,Y is equal to the wage rate.
Labor economics is studied as a distinct subfield of economics because
the bulk of national income is received by labor. the concepts of supply and demand must be revised somewhat when applied to labor markets. labor economics can be used to analyze major socioeconomic trends such as the surge in the number of women workers.
what makes it reasonable to make statistical inferences from an estimate?
the coefficient estimate is much greater than twice the standard error.
The concept of demand must be modified when applied to labor markets to reflect the fact that
the demand for labor is derived from the demand for the various products that labor produces.
for a wage increase,
the income effect reduces desired work hours and the substitution effect increases desired work hours.
The substitution effect is
the part of the total change in desired work hours that is due to a change in the wage rate, with real income or utility constant.
The income effect is
the part of the total change in desired work hours that is due to the change in real income resulting from a change in the wage rate.
The higher the individual's wage rate,
the steeper the budget constraint.
An increase in the wage rate will increase desired hours of work if
the substitution effect dominates the income effect.
As distinct from product market transactions, labor market transactions are unique in that
to the seller, the nonmonetary characteristics of the sale can be as important as the price.
The aggregate labor force participation rate in the U.S. is currently about
two-thirds.
According to a newspaper account from Washington State, lottery winners in that state
usually continued to work when prizes were $1 million or less and usually quit work when prizes exceeded $4 million.
The added-worker effect suggests that
when one family member loses a job, other family members may enter the labor force.
when economists estimate empirical models, they are usually the most concerned with:
whether variable A causes a change in variable B.
The bulk of national income flows to
workers in the form of wages and salaries.
