PSU Econ304 section3 Lesson3 production and the classical labor market model Quiz
Suppose that a country is rapidly making the transition from an agricultural based economy to an economy in which most of GDP comes from the production of manufactures.
Since structural unemployment results from a mismatch between workers and the skills needed in the current work environment, it is likely to increase in this new working environment.
Let alpha = 0.3. How is the productivity variable measured?
StartFraction Upper Y Over Upper K Superscript 0.3 Baseline Upper L Superscript 0.7 EndFraction
Consider the effects of the Internet on frictional unemployment. How do you think websites that allow employees to search for job opportunities more efficiently have affected the job search?
They have likely lowered transaction costs of the job search and decreased frictional unemployment.
How does total factor productivity differ from labor productivity?
Total factor productivity tells us how productive capital and labor are, whereas labor productivity tells us how productive labor is.
Which of the following is not one of the three categories of employment status?
Underemployed
A negative supply shock, such as an oil price shock, would
decrease the equilibrium real wage.
Over time, the natural rate of unemployment has
decreasedlong dashin part because of increases in temporary work.
Real wage growth can be explained primarily by
labor productivity growth.
Diminishing marginal returns means that by adding an extra input
output increases, at a decreasing rate.
The difference in per capita income between the two countries comes from
the differences in both capital per worker and the productive efficiency of the economy.
Suppose there is excess demand for labor. You can conclude that
the real wage will rise.
Discouraged workers move from
unemployment to not in the labor force.
Frictional unemployment is best described as
temporary unemployment as workers look for a better job fit.
total factor productivity
the amount of output that can be achieved with a given amount of factor inputs A=Y/K^0.3*L^0.7
per capital income
the average amount of money earned by each person in a political unit Y/L
The quantity of labor supplied is positively related to the real wage rate because as the wage rises
workers are more likely to choose work over leisure.
As the real wage rate increases, the quantity of labor demanded
falls, because as the real wage increases it is less likely for the real wage to be less than the benefit received from hiring the worker.
Consider the Cobb-Douglas production function: Upper Y equals Upper F left parenthesis Upper K comma Upper L right parenthesis equals AK Superscript alpha Baseline Upper L Superscript 1 minus alpha. In the definition, Y is output , which is determined by A, productivity , and the amount of factor inputs K, capital , and L, labor Which element in the production function cannot be measured directly?
A
Which of the following is not a negative supply shock?
A decrease in population
Which of the following is not a positive supply shock?
An increase in capital equipment
Considering the graphic representation of the labor market, analyze the effect of technological advances that have increased workers' productivity in the last few decades (e.g., the Internet). What would be the effect on the real wage and employment if the supply curve does not shift?
Both the real wage and the equilibrium quantity of labor have likely risen.
Which are the two characteristics of the Cobb-Douglas production function that make it particularly useful to macroeconomists?
Constant returns to scale and diminishing marginal product
What is the rule firms follow to determine how much of each input to hire in order to maximize profits?
Firms demand a quantity of each factor of production factor up until the marginal product of that factor falls to its real factor price.
Based on the behavior of the two data series, what are the implications for growth in GDP per capita?
GDP per capita growth will primarily be driven by the increasing labor productivity.
Which of the following is not a possible cause of real wage rigidity?
High salaries Wage rigidities lead to unemployment because they prevent wages from going to market-clearing levels, so that the quantity demanded of labor remains below what workers are willing to supply. Wage rigidities occur because wages are slow to adjust, or because minimum wage laws, efficiency wages, or labor unions prevent wages from being adjusted downward.
What relationship does the aggregate production function portray?
How much output is produced from given quantities of the factors of production.
How has inflation affected purchasing power over that period?
Inflation has eroded away a substantial part of the purchasing power of the nominal increase in wages.
Consider the production function written as Y = F(K, L). In the short run, which of the production function's variables are endogenous and which are exogenous?
K and L are exogenous and Y is endogenous.
The natural rate of unemployment can be calculated with which of the following formulas?
Natural rate of unemploymentequalsactual rate of unemploymentminuscyclical unemployment
The profit function for a firm can be written as
P times F(K,L) minus RK minus WL
Which of the following is not a source of supply shocks?
Population explosions
What are supply shocks?
Shifts of the production function
Anthony currently earns $25 an hour and works 40 hours a week. When his boss offers to pay him $29 per hour, Anthony decides to accept the offer, but decides to keep working 40 hours. What is the effect of Anthony's decision on the labor supply curve?
The substitution and income effects offset each other completely.
The government could help with this problem by
creating a training program that encourages or facilitates the acquisition of new skills.
Structural unemployment occurs if
potential workers don't have the skills that firms currently need.
Real wage rigidity occurs when
real wages cannot adjust to a level that equates the demand for and supply of labor.
Cyclical unemployment occurs most often during
recession.
