ECO 111 Quiz 6

Most economists generally argue ________ trying to block technological advances because these technological advances ________. A. in favor of; increase wage inequality B. against; are necessary for improved standards of living C. against; promote wage equality D. in favor of; cause the economy to grow to rapidly

B. against; are necessary for improved standards of living Technological advances are a major reason why economies grow. Thus economists promote technological advances as a way to improve living standards.

Holding other factors constant, technological progress ________ the real wage and ________ employment. A. increases; decreases B. increases; does not change C. increases; increases D. decreases; increases

C. increases; increases Technical progress almost always increases worker productivity, which makes workers more desirable to employers. The demand for labor will shift right and therefore puts upward pressure on wages and increase employment too.

Frictional unemployment may be economically beneficial if: A. the social costs are limited to smaller tax revenues collected. B. its psychological costs are borne only by the unemployed worker. C. it leads to a better match between worker and job. D. losses in economic output are small.

C. it leads to a better match between worker and job. Frictional unemployment allows some "slippage" in the job market, much like what happens in the apartment rental market. If there were never openings in either market, there would be no opportunities to "trade up."

Minimum wage laws contribute to structural unemployment by: A. allowing unemployed workers to search longer or less intensively for jobs. B. keeping wages below the market-clearing level. C. keeping wages above the market-clearing level. D. forcing unemployed workers to take the first job offered to them.

C. keeping wages above the market-clearing level. Minimum wage laws distort the efficient working of labor markets by keeping wages above market-clearing levels. Thus, these laws contribute to structural unemployment.

Jim Brown would like to work, but has not looked for work in the past four weeks because he does not believe any jobs are available. In the official employment statistics, Jim is classified as: A. unemployed. B. employed. C. out of the labor force. D. underemployed.

C. out of the labor force. If a prospective worker has not looked for work in four weeks then that person is considered to be out of the labor force.

From an economic perspective, the best response to increased wage inequality is to: A. stop all international trade. B. block future technological change. C. provide transition aid to disadvantaged workers. D. make skill-biased technological change illegal.

C. provide transition aid to disadvantaged workers. Globalization has increased the size of markets, which is generally good. To help the displaced workers who have seen a decline in the demand for their labor, transition aid can be used to provided retraining and relocation.

High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. How many workers will be hired if the hourly wage for workers is $120? A. 0 B. 3 C. 5 D. More than 5

A. 0 Since the marginal product is diminishing when more workers are hired, the value of the marginal product is also diminishing. While the first worker adds 10 chairs per hour (10 - 0), the second worker only adds 8 chairs per hours (18-10) and so forth. The marginal value of marginal product is therefore: $100 for the first worker (10 * $10), $80 for the second worker (8 * $10), $60 for the third worker (6 * $10), $40 for the forth worker (4 * $10), and $20 for the fifth and final worker (2 * $10). So the firm will hire no workers. The value of marginal product for the first worker is $100 whereas the cost is $120. Hiring the first worker would result in negative profit.

Based on the labor market diagram below, if the minimum wage is increased from $10 to $12 per hour, the numbered of unemployed workers will increase by ________ workers. A. 13 B. 8 C. 15 D. 5

A. 13 At a wage of $12 per hours, 80 workers are demanded and 115 workers supplied; so 35 workers cannot find work. At a wage of $10 per hour, 85 workers are demanded and 107 workers supplied; so 22 workers cannot find work. The increased minimum wage has left 13 additional workers unable to find work.

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy? A. 18.0 million B. 43.2 million C. 28.8 million D. 12.0 million

A. 18.0 million Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or(0.40*x) = 200,000,000, where x is the working-age population. Then x = 200,000,000/0.40 = 500,000,000, or 500 million. With 200 million of these 500 million people being outside the labor force, there must be 300 million in the labor force. Unemployment is 6 percent of 300 million, or 18.0 million.

The labor force equals the number of people: A. both employed and unemployed. B. employed. C. aged 16 years and older. D. employed, unemployed and discouraged.

A. both employed and unemployed. The labor force includes both people working and those 16 and older who are not working but are actively looking for work.

Periods of unusually low production in an economy result in ________ unemployment. A. cyclical B. frictional C. structural D. environmental

A. cyclical Cyclical unemployment results from a dip in the business cycle.

Government regulations that increase the cost to the employer of hiring workers will: A. decrease the demand for labor. B. decrease the supply of labor. C. increase the supply of labor. D. increase the demand for labor.

A. decrease the demand for labor. If government regulations increase, e.g., like requiring drug testing for all workers, it decreases demand for workers. Businesses sometimes replace workers with machines as a result.

Government health and safety regulations or anti-discrimination laws can reduce real wages by: A. decreasing the demand for labor. B. increasing worker productivity. C. decreasing the supply of labor. D. reducing employer costs.

A. decreasing the demand for labor. Government laws and regulations sometimes discourage employers from hiring. These laws and regulations effectively shift the demand for labor to the left.

Martha did not like her job as a receptionist, so she quit and is looking for one that better suits her artistic talents. Ting Pei would like to work, but employers are not willing to hire him because he does not speak English. Martha is ________ unemployed and Ting Pei is ________ unemployed. A. frictionally; structurally B. cyclically; structurally C. structurally; frictionally D. structurally; cyclically

A. frictionally; structurally Martha expects to be out of work for a short while as she finds a better fit for her talents. Ting Pei, on the other hand, might be out of work for a long time as he learns a new language that will make him more employable.

Real wages increased in industrialized countries in the twentieth century because the demand for labor: A. increased more rapidly than the supply of labor increased. B. increased more slowly than the supply of labor increased. C. increased, while the supply of labor decreased. D. decreased, while the supply of labor increased.

A. increased more rapidly than the supply of labor increased. Labor markets follow the same principles as goods and services markets: when both supply and demand rise at the same time, it is certain that quantity will increase but uncertain whether price will rise or fall. When wages rose in this case, the demand shift was greater than the supply shift.

An increase in the size of the working-age population: A. increases labor supply. B. decreases labor supply. C. increases labor demand. D. decreases labor demand.

A. increases labor supply. When the working-age population increases, the potential labor supply increases.

According to the principle of diminishing returns to labor, if the amount of capital and other inputs are held constant, employing additional workers: A. increases output at a decreasing rate. B. decreases output at an increasing rate C. increases output at a constant rate. D. increases output at an increasing rate.

A. increases output at a decreasing rate. This is the definition of "diminishing returns to labor."

Holding other factors constant, an increase in the capital stock ________ the real wage and ________ employment. A. increases; increases B. increases; decreases C. increases; does not change D. decreases; increases

A. increases; increases Increases in the capital stock make workers more productive, which increases the demand for labor and puts upward pressure on wages and increases employment.

Involuntary part-time workers are: A. not counted as unemployed. B. short-term unemployed workers. C. considered out of the labor force. D. chronically unemployed.

A. not counted as unemployed. Involuntary part-time workers would like to work full-time but cannot find suitable positions. Since they are working, they are considered "employed."

The slowdown in the growth of real wages in the United States since 1973 is consistent with a concurrent: A. slowdown in productivity gains. B. speedup in the rate of inflation. C. slowdown in the growth of the working age population. D. slowdown in immigration into the country.

A. slowdown in productivity gains. A slowdown in productivity gains will reduce (or even reverse) the growth in the demand for labor. Slower increases in the demand for labor will reduce the growth in real wages and a decrease in the demand for labor will reduce real wages as demand shifts left.

Larger increases in the demand for labor than in the supply of labor explain: A. the substantial increase in real wages B. the slowdown in real wage growth. C. increasing wage inequality. D. skill-biased technological change.

A. the substantial increase in real wages When both labor supply and labor demand rise at the same time, it is certain that quantity will increase but uncertain whether wages will rise or fall. If wages rise, we know the demand shift was larger than the supply shift.

The following table provides information about production at the XYZ-TV Company. How many workers will XYZ-TV Company hire if the going wage for TV production workers is $60,000? A. More than 5 B. 0 C. 4 D. 5

B. 0 The firm will hire no workers. The value of marginal product for the first worker is $35,000 whereas the cost is $60,000.

Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy? A. 800 million B. 1.0 billion C. 1.6 billion D. 250 million

B. 1.0 billion Since the participation rate is 80 percent, 20 percent are not participating in the labor market. So the 200 million people are not participating represent 20 percent of the working-age population, or (0.20*x) = 200,000,000, where x is the working-age population. Then x = 200,000,000/0.20 = 1,000,000,000, or 1 billion

Data for an economy show that the unemployment rate is 6 percent, the participation rate is 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy? A. 333 million B. 500 million C. 1.20 billion D. 800 million

B. 500 million Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or (0.40*x) = 200,000,000, where x is working-age population. Then x = 200,000,000/0.4 = 500,000,000, or 500 million.

Who from among the following would be classified as out of the labor force? A. Jack Little, a 21 year old new college graduate actively looking for his first job. B. Amanda Pie, a full-time homemaker. C. Brenda Smith, an 18 year old college student employed part-time at a fast food restaurant. D. Mario Faubert, a NHL hockey player at home sick with the flu.

B. Amanda Pie, a full-time homemaker. Amanda Pie is out of the labor force because she is not employed or actively looking for work.

Which of the following is an example of structural unemployment? A. Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked. B. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. C. Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. D. Alan, a software engineer, lost his job when the internet startup he worked for went bankrupt. He interviewed with five companies in the area before taking a job with another firm in the industry.

B. Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. Dora lost her job because the industry she worked in was most likely moved out of the country. The job may never come back, so she should train in another field or move to find work.

Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will ________ and employment of agricultural workers will ________, A. decrease; not change B. decrease; decrease C. increase; decrease D. increase; increase

B. decrease; decrease If food prices decline then the producers of food will be less inclined to hire workers, so the demand for labor shifts left Wages and employment will decrease.

If there is a floor on wages created by a minimum wage, union contracts, or other factors, then a decline in the marginal productivity of low-skilled workers will ________ the demand for low-skilled workers and ________ the number of unemployed workers. A. increase; decrease B. decrease; increase C. decrease; decrease D. increase; increase

B. decrease; increase Declining marginal productivity of low-skilled workers makes them less desirable and decreases the demand for them. The market price cannot react due to the wage floor so the result is higher unemployment.

Skill-biased technological change increases wage inequality by altering the ________ high-skilled workers relative to low-skilled workers. A. supply of B. demand for C. reservation price of D. mobility of

B. demand for High-skilled workers find the demand for their services has increased whereas low-skilled workers see the opposite. The result is greater wage inequality.

The participation rate is the number of people: A. employed and unemployed divided by the labor force B. employed and unemployed divided by the population aged 16 years and older. C. employed divided by the population aged 16 years and older. D. employed divided by the labor force.

B. employed and unemployed divided by the population aged 16 years and older. The participation rate is the number of people employed and unemployed divided by the population aged 16 years and older.

Factors increasing the U.S. labor supply and thereby contributing to the slowdown in real-wage growth that began in the 1970s include ________ and ________, A. increasing wage inequality; globalization B. increased labor force participation by women; the coming-of-age of the baby-boom generation C. technological progress; diminishing returns to labor D. skill-biased technological change; globalization

B. increased labor force participation by women; the coming-of-age of the baby-boom generation The expanded role of women in the labor force and huge numbers in the baby-boom generation shifted labor supply out greatly. That shift put downward pressure on wage rates in the U.S.

Labor unions contribute to structural unemployment by: A. keeping wages below the market-clearing level. B. keeping wages above the market-clearing level. C. allowing unemployed workers to search longer or less intensively for jobs. D. forcing unemployed workers to take the first job offered to them.

B. keeping wages above the market-clearing level. Labor unions artificially restrict the supply of workers in an effort to keep wages above the market-clearing level.

Structural unemployment is: A. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers. B. long-term and chronic unemployment that exists even when the economy is producing at a normal rate C. short-term unemployment that is associated with the process of matching workers with jobs. D. the extra unemployment that occurs during periods of recession.

B. long-term and chronic unemployment that exists even when the economy is producing at a normal rate Structural unemployment is long-term and chronic unemployment that exists when the economy is producing at a normal rate.

Depression and lost self-esteem are examples of the ________ costs of unemployment, while the lost income and tax revenue are examples of the ________ costs of unemployment. A. economic; psychological B. psychological; economic C. economic; social D. social; psychological

B. psychological; economic Unemployment creates more than just economic costs such as lost income and tax revenue, it also causes psychological costs such as lost self-esteem among others.

The two most important factors contributing to increased productivity in industrialized countries in the twentieth century were: A. higher relative prices and a larger labor supply. B. technological progress and increases in the capital stock. C. higher relative prices and technological progress. D. technological progress and increases in the labor supply.

B. technological progress and increases in the capital stock. Industrial countries invested heavily in human and physical capital in the twentieth century. These investments greatly increased productivity.

The unemployment rate equals the number of people: A. unemployed. B. unemployed divided by the labor force. C. unemployed divided by the number employed. D. unemployed plus discouraged workers divided by the labor force.

B. unemployed divided by the labor force. The unemployment rate equals the number of people unemployed divided by the labor force.

The towns of Jekyll and Hyde each have a labor force of 2,000 people. In Jekyll, 500 people were unemployed for the entire year, while the rest of the labor force was employed continuously. In Hyde, every member of the labor force was unemployed for three months and was employed for nine months. The average duration of unemployment spells over the year was ________ months in Jekyll and ________ months in Hyde. A. 12; 9 B. 3; 9 C. 12; 3 D. 3; 3

C. 12; 3 An unemployment spell is the average duration of unemployment per worker. In Jekyll, workers were out of work for 12 months, on average, whereas in Hyde it averaged 3 months.

In the United Sates, the average annual rate of growth of real wages was fastest in the period: A. 1996-2010. B. 1960-1995. C. 1960-1973. D. 1973-1995.

C. 1960-1973. The decade of the 1960's, and spilling into the 70's, saw large increases in average real wages.

Based on the figure, if a union contract requires that workers be paid $25 per hour, there will be ________ unemployed workers. A. 12 B. 9 C. 21 D. 31

C. 21 At $25 per hour, 185 workers are demanded and 206 workers are supplied, creating unemployment of 21 workers.

Based on the labor market diagram below, if the minimum wage is set at $10 per hour, there will be ________ unemployed workers. A. 15 B. 7 C. 22 D. 27

C. 22 At a wage of $10 per hour, there are 85 workers demanded and 107 workers supplied; so 22 workers are unable to find

The following table provides information about production at the XYZ-TV Company. How many workers will XYZ-TV Company hire if the going wage for TV production workers is $30,000? A. 1 B. 0 C. 3 D. 2

C. 3 The firm will hire 3 workers. At that level, the value of marginal product is $31,000 whereas the cost is only $30,000. Note that a fourth worker would only add $29,000 of value but cost an additional $30,000

The following table provides information about production at the XYZ-TV Company. How many workers will XYZ-TV Company hire if the going wage for TV production workers is $28,000? A. 1 B. 2 C. 4 D. 3

C. 4 The firm will hire 4 workers. At that level, the value of marginal product is $29,000 whereas the cost is only $28,000. Note that a fifth worker would only add $27,000 of value but cost an additional $28,000.

Who from among the following would be counted as unemployed? A. A person who is willing to work but has not looked for a job in two months B. All of these people would be counted as unemployed. C. A person who is willing to work and has looked for a job in the last week. D. A person with a part-time job who wants and is looking for a full-time job.

C. A person who is willing to work and has looked for a job in the last week. For a person to be classified as unemployed, he or she must be willing to work and have recently looked for work.

Who from among the following would be classified as employed? A. Brenda Smith, an 18 year old full-time college student. B. Jack Little, a 21 year old new college graduate actively looking for his first job. C. Mario Faubert, a NHL hockey player at home sick with the flu D. Sarah Lopez, a retired public school teacher

C. Mario Faubert, a NHL hockey player at home sick with the flu Mario Faubert is employed because he is in the labor force and has a job.

Who from among the following is counted as employed? A. Frank would like to work, but has not looked for work because he believes no jobs are available. B. Anna Marie spends all of her time taking care of her children at home. C. Ray wants to work forty hours per week, but can only find work for twenty hours per week. D. Martin has been offered several jobs in the past four weeks, but has chosen not to accept any of the offers.

C. Ray wants to work forty hours per week, but can only find work for twenty hours per week. Ray is working, so he is considered "employed."

Slower growth in labor demand in combination with increases in labor supply explains ________ accompanied by ________. A. a slowdown in real wage growth; increasing wage inequality B. accelerated real wage growth; a decline in employment C. a slowdown in real wage growth; rapid employment growth D. a slowdown in real wage growth; a decline in employment

C. a slowdown in real wage growth; rapid employment growth When both labor supply and labor demand rise at the same time, it is certain that quantity will increase but uncertain whether wages will rise or fall. If the demand shift was smaller than the supply shift there is downward pressure on real wages but an increase in employment.

An "unemployment spell" is a period during which: A. an unemployed individual leaves the labor force and then returns. B. the unemployment rate exceeds 15 percent. C. an individual is continuously unemployed. D. the unemployment rate is less than 10 percent.

C. an individual is continuously unemployed. An unemployment spell is a period during which an individual is continuously unemployed.

Leaving the labor force or finding a job are two ways that: A. a person can become an involuntary part-time worker. B. a person can become a discouraged worker. C. an unemployment spell can end. D. an unemployment spell can begin.

C. an unemployment spell can end. Leaving the labor force would mean a person was no longer actively looking for work, and therefore no longer counted in the labor force. Finding a job changes a person's status from unemployed to employed. Both of these would end an unemployment spell.

A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ________ and employment in Omega will ________. A. increase; increase B. increase; not change C. decrease; decrease D. increase; decrease

C. decrease; decrease A smaller capital stock in Omega causes workers to be less productive, which decreases the demand for labor and puts downward pressure on wages. With lower wages, workers desire fewer hours of work and employment decreases too.

Holding other factors constant, if a larger proportion of the population enters the labor force as a result of a growing social acceptance of women working, then the real wages of workers will ________ and employment of workers will ________, A. increase; decrease B. decrease; not change C. decrease; increase D. increase; increase

C. decrease; increase If social attitudes become more accepting of women workers, then the supply of labor shifts right. The number of workers will grow but increased competition for jobs will decrease wages

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ________ and wages in the computer industry ________. A. increase; decrease B. decrease; decrease C. decrease; increase D. increase; increase

C. decrease; increase In this case, fewer workers are demanded in the declining shoe industry, while more workers are demanded in the growing computer industry. Wages will adjust to the new demands; decreasing in the shoe industry and increasing in the computer industry.

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, which causes domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, the demand for labor in the shoe industry ________ and the demand for labor in the computer industry ________. A. decreases; decreases B. increases; increases C. decreases; increases D. increases; decreases

C. decreases; increases In this case, fewer workers are demanded in thedeclining shoe industry, while more workers are demanded in the growing computer industry.

Features of the labor market that are likely to cause structural unemployment include all of the following except: A. minimum wage laws. B. unemployment compensation. C. differences in the skills and experience of workers. D. labor unions.

C. differences in the skills and experience of workers. Labor unions, minimum wage laws and unemployment compensation are structural impediments to smooth running labor markets and they impede labor market adjustments.

People who say that they would like to have a job, but have not made an effort to find a job in the past four weeks, are called ________ workers. A. involuntary part-time B. chronically unemployed C. discouraged D. unemployed

C. discouraged Discouraged workers are people who say they would like to have a job but have not made an effort to find one in the past four

Each person who is 16 years or older is considered to be in one of the following categories: A. employed, unemployed, or discouraged worker. B. part-time worker, full-time worker, or out of the labor force. C. employed, unemployed, or out of the labor force. D. part-time worker, full-time worker, or unemployed.

C. employed, unemployed, or out of the labor force. For economic measurement purposes, workers are sorted into 3 categories: employed, unemployed, or out of the labor force.

All of the following describe trends in U.S. labor markets except: A. substantial growth in real ages during the last century. B. a slowdown in real wage growth since the 1970s. C. growing wage equality in the United States in recent decades. D. substantial growth in the level of employment in the United States.

C. growing wage equality in the United States in recent decades. In recent decades the United States has seen increasing wage dispersion: the rich are getting richer.

Increasing wage inequality results when international trade leads to ________ wages for workers in exporting industries and ________ wages for workers in importing industries. A. lower; no change in B. higher; higher C. higher; lower D. lower; higher

C. higher; lower In industries where U.S. foreign competition is weak, workers see increasing wages due to increased demand for such workers with globalization. Conversely, in industries where foreign competition is strong, U.S. workers see falling real wages due to decreased demand for such workers. This phenomenon increases wage inequality.

Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ________ and the wages of workers producing glasses will ________. A. increase; increase B. increase; not change C. increase; decrease D. decrease; increase

C. increase; decrease Workers in the dishes industry see increasing wages because the strong demand for dishes increases the demand for workers. Conversely, the glasses industry sees decreasing wages due to reduced demand for glasses and therefore less demand for workers.

The duration of an unemployment spell is a measure of the: A. income lost while unemployed. B. number of times during a year a worker becomes unemployed. C. length of time a spell of unemployment lasts D. number of workers unemployed during a specific period of time.

C. length of time a spell of unemployment lasts An unemployment spell is a period during which an individual is continuously unemployed.

The growth rate of average annual earnings in the United States from 1973 to 1995was: A. the same as it was from 1960 to 1973. B. higher than it was from 1960 to 1973. C. lower than it was from 1960 to 1973. D. roughly equal to zero.

C. lower than it was from 1960 to 1973. The U.S. growth rate of average annual earnings slowed in the early 1970's, and was negative until 1995.

When unemployment insurance benefits exceed the wages a worker could earn when employed, the worker will have an incentive to: A. decrease his/her reservation price. B. have his/her unemployment insurance benefits cancelled. C. remain unemployed longer than otherwise D. accept the first job offered.

C. remain unemployed longer than otherwise The more generous are unemployment benefits, the less hurried job seekers are. This lengthens periods of unemployment.

The minimum payment you are willing to accept to do a job is your: A. value of marginal product. B. real wage. C. reservation price D. nominal wage.

C. reservation price The minimum payment you are willing to accept to do a job is your reservation price.

Frictional unemployment is: A. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers. B. the unemployment that results when people retire or leave the labor force. C. short-term unemployment that is associated with the process of matching workers with jobs D. the extra unemployment that occurs during periods of recession.

C. short-term unemployment that is associated with the process of matching workers with jobs Frictional unemployment is short-term unemployment that is associated with the process of matching workers with jobs.

A Luddite is: A. a consumer who refuses to buy imported goods, even if they are cheaper. B. a worker whose real wage rises as a result of globalization. C. someone who opposes the introduction of new technologies. D. a fictional character from American folk history.

C. someone who opposes the introduction of new technologies. A Luddite is someone who opposes the introduction of new technologies.

Arthur is an unskilled worker who is currently unemployed. He has been offered a job that pays $40 a day, but he is currently receiving unemployment insurance benefits equal to $50 a day, so he chooses not to accept the job and to continue looking for a better job. Arthur is ________ unemployed. A. frictionally B. not C. structurally D. cyclically

C. structurally Arthur is being very selective in picking a job because he has unemployment insurance that pays him more than working would. According to the definition, he is structurally unemployed.

Long-term increases in productivity that have increased the demand for labor, and raised real wages, have resulted primarily from ________ and ________, A. technological progress; an increased labor supply B. a modernized capital stock; an increased labor supply C. technological progress; a modernized capital stock D. a modernized capital stock; skill-biased technological change

C. technological progress; a modernized capital stock Technological progress and a modernized capital stock will increase worker efficiency, which increases the demand for labor and puts upward pressure on wages.

In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted jobs. What is the unemployment rate in this town? A. 14.5% B. 11.0% C. 10.0% D. 13.7 %

D. 13.7 % To compute the unemployment rate you must know the number unemployed and divide it by the labor force. The labor force is 73, taking out those 10 children who are too young to work and the 17 people who are not in the labor force (retired, full-time students, and homemakers). We know 63 are working, so 10 must be unemployed. Ten divided by 73 is 13.7%.

High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. How many workers will be hired if the hourly wage for workers is $70? A. 3 B. 1 C. 4 D. 2

D. 2 Since the marginal product is diminishing when more workers are hired, the value of the marginal product is also diminishing. While the first worker adds 10 chairs per hour (10 - 0), the second worker only adds 8 chairs per hours (18-10) and so forth. The marginal value of marginal product is therefore: $100 for the first worker (10 * $10), $80 for the second worker (8 * $10), $60 for the third worker (6 * $10), $40 for the forth worker (4 * $10), and $20 for the fifth and final worker (2 * $10). So the firm will hire 2 workers. At that level, the value of marginal product is $80 per hour whereas the cost is only $70 per worker. Hiring additional workers will reduce profitas the value of the marginal product for the third worker is only $60 per hour.

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are employed in this economy? A. 30 million B. 300 million C. 188 million D. 282 million

D. 282 million Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or(0.40*x) = 200,000,000, where x is the working-age population. Then x = 200,000,000/0.40 = 500,000,000, or 500 million. With 200 million of these 500 million people being outside the labor force, there must be 300 million in the labor force. Unemployment is 6 percent of 300 million, or 18.0 million. Thus, 300 million minus 18 million equals 282 million employed.

In a country with 200 million people aged 16 years and older, 120 million are in the labor force, and 114 million are employed, what is the participation rate? A. 57 percent B. 40 percent C. 95 percent D. 60 percent

D. 60 percent To find the participation rate, divide the labor force by the number of people 16 and older, i.e., 120,000,000/200,000,000 = 0.60, or 60 percent.

Who from among the following would be classified as out of the labor force? A. A person who is willing to work and has looked for a job in the last week. B. None of these people would be classified as out of the labor force. C. A person with a part-time job who wants and is looking for a full-time job. D. A person who is willing to work but has not looked for a job in two months.

D. A person who is willing to work but has not looked for a job in two months. For a person to be classified as out of the labor force, he or she must not be actively looking for work.

Slower real wage growth in the U.S. since the 1970s accompanied by rapid job growth, can be explained by: A. a productivity slowdown accompanied by a decrease in the labor supply B. globalization. C. skill-biased technological change. D. a productivity slowdown accompanied by an increase in the labor supply.

D. a productivity slowdown accompanied by an increase in the labor supply. A productivity slowdown occurred in the early 1970's, reducing the increase in the demand for labor. Also, the expanded role of women in the labor force and huge numbers of baby-boomers increased labor supply and put downward pressure on wage rates in the U.S.

Unemployment insurance contributes to structural unemployment by: A. keeping wages above the market-clearing level. B. forcing unemployed workers to take the first job offered to them. C. keeping wages below the market-clearing level. D. allowing unemployed workers to search longer or less intensively for jobs.

D. allowing unemployed workers to search longer or less intensively for jobs. Unemployment insurance makes workers more selective in their job search, which lengthens the time of mismatch between workers and jobs.

Workers whose spells of unemployment are broken up by brief periods of employment or withdrawal from the labor force are referred to as ________ workers A. short-term unemployed B. long-term unemployed C. discouraged D. chronically unemployed

D. chronically unemployed Workers whose spells of unemployment are broken up by brief periods of employment or withdrawal from the labor force are referred to as chronically unemployed workers.

An increase in unemployment insurance benefits will: A. decrease the demand for labor. B. increase the demand for labor. C. increase job search efforts of unemployed workers. D. decrease job search efforts of unemployed workers.

D. decrease job search efforts of unemployed workers. If unemployment insurance benefits go up, as they often do under political pressure, unemployed workers will be more selective in the job they accept. This decreases job search efforts.

Since the year2000, the share of the populationholding or actively looking forjobs have ________ in the United States: A. been record high. B. increased. C. remained approximately constant. D. decreased.

D. decreased. Employment grew rapidly in the post-1970's, but peaked in 2000. Since then the share of the population holding oractively looking for jobs have steadily decreased.

An increase in the demand for workers producing computers for export versus producing agricultural products that can be imported more cheaply from abroad is an example of how increasing wage inequality can result from: A. increasing reservation prices. B. the diminishing marginal product of labor. C. the diminishing marginal product of capital. D. globalization.

D. globalization. Globalization puts downward wage pressure on industries where foreign competition is strong and upward wage pressure on industries where foreign competition is weak. This phenomenon often increases wage inequality.

If the existence of alternative opportunities makes people become less willing to work in poultry processing plants, then the real wage of unskilled workers in poultry processing plants is predicted to ________ and the employment of unskilled workers in poultry processing plants is predicted to ________. A. increase; not change B. increase; increase C. decrease; decrease D. increase; decrease

D. increase; decrease If the work setting becomes more favorable outside of poultry processing plants, then the supply of workers will shift left and there will be more competition for the remaining poultry processing workers, causing wages will increase and employment to decrease.

Holding other factors constant, if oil prices rise relative to the prices of other products, then the real wages of oil workers will ________ and employment of oil workers will ________, A. increase; decrease B. decrease; increase C. decrease; not change D. increase; increase

D. increase; increase If oil prices rise, then producers of oil will be more inclined to hire workers and there will be more demand for oil workers (demand shifts right). As a result, wages and employment will increase.

In the market for labor, the price of labor is the: A. marginal product of labor. B. number of hours employed per year. C. same as price of the product produced by the labor. D. real wage.

D. real wage. In the market for labor, the "price" is the real wage paid to workers in exchange for their services.

Technological change that affects the marginal products of high-skilled and low-skilled workers differently is called ________ technological change. A. capital-labor B. high-low C. marginal-productivity D. skill-biased

D. skill-biased Technological change that affects the marginal products of high-skilled and low-skilled workers differently is called skill-biased technological change.

Heterogeneity and the dynamic nature of labor markets are the principal causes of ________ unemployment. A. chronic B. cyclical C. frictional D. structural

D. structural Workers are regularly coming and going from the labor force because there is so much variety in the labor market. For example, people retire every day and workers move from time-to-time, both of which are dynamic.

All of the following describe trends in U.S. labor markets except: A. a slowdown in real wage growth since the 1970s. B. growing wage inequality in the United States in recent decades. C. substantial growth in real ages during the last century. D. substantial growth in the level of employment in the United States since 2000.

D. substantial growth in the level of employment in the United States since 2000. Employment grew rapidly in the post-1970's, but peaked in 2000. Since then the share of the population holding oractively looking for jobs have steadily decreased.

Cyclical unemployment is: A. long-term and chronic unemployment that exists even when the economy is producing at a normal rate. B. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers. C. short-term unemployment that is associated with the process of matching workers with jobs. D. the extra unemployment that occurs during periods of recession.

D. the extra unemployment that occurs during periods of recession. Cyclical unemployment is the extra unemployment that occurs during periods of recession.

Structural unemployment will decrease when: A. the minimum wage is increased B. unemployment insurance benefits are increased. C. union wages are increased. D. the minimum wage is decreased.

D. the minimum wage is decreased. If the minimum wage is decreased, employers will want to hire more workers or increase the quantity of labor demanded. This opens job opportunities for those who are looking for work.

The number of unemployed divided by the labor force equals the: A. employment rate. B. duration rate. C. labor-force participation rate. D. unemployment rate.

D. unemployment rate. The unemployment rate is the number of unemployed divided by the labor force.

The demand for labor increases when the: A. value of the marginal product of labor decreases. B. real wage increases. C. real wage decreases. D. value of the marginal product of labor increases.

D. value of the marginal product of labor increases. The demand for labor increases when the value of the output rises. Economists call this an increase in the "value of marginal product." Note that the quantity of labor demanded will increase when real wages decrease, however that describes a movement along a stationary demand for labor curve rather than a shift of the curve itself.

Two groups of workers not counted as unemployed in the official unemployment statistics are ________ workers. A. chronically unemployed and short-term unemployed B. chronically-unemployed and discouraged C. discouraged and involuntary part-time D. chronically unemployed and involuntary part-time

Official statistics count discouraged workers as being out-of-the labor force; involuntary part-time workers are counted as employed.