Ec 380 Exam 1

4. Over the last five years in Michigan, declining state and local tax revenues, falling numbers of school age children, and laws limiting the bargaining power of teachers' unions have slowed the growth of teacher salaries, and created the expectation that the likely future earnings of Michigan school teachers will be lower (in real, or inflation adjusted, terms) than in the past. Historically, many high school aged females have considered both teaching and nursing to be desirable career choices, and have expressed a willingness to do either. Assuming that this preference of high-school aged females persists into the future, the decline in the economic prospects of Michigan teachers would: a. Cause the supply curve of nurses to shift to the right b. Cause the demand curve for nurses to shift to the right c. Cause the supply curve for nurses to shift to the left d. Cause the demand curve for nurses to shift to the left. 5. (Continued from last question). What will be the effect of the decline on the future economic prospect of Michigan teachers on the equilibrium wages and employment of nurses? a. Employment will rise and wages will fall b. Employment will rise and wages will rise c. Employment will fall and wages will rise d. Employment will fall and wages will fall e. there will be no change in equilibrium wages or employment.

a, a

In general, when representatives of the Democratic party or the business community argue for "Comprehensive Immigration Reform", they are advocating policies that would make it easier for low skilled workers from other nations to immigrate to the US, and for foreign nationals already in the US to obtain jobs. 5. How do policies of this sort affect the market for low skilled workers in the US? a. They shift the supply curve of low skilled workers to the right b. They shift the supply curve of low skilled workers to the left c. They shift the demand curve for low skilled workers to the left d. They shift the demand curve for low skilled workers to the right. 6. (Continued from last question) According to economic theory, how do such policies affect the market equilibrium employment and wages of low skilled workers, native and immigrant together? a. employment and wages both increase b. employment increases, wages decrease c. employment decreases, wages increase d. employment and wages both decrease. 7. True or False (Continued from last question): If high skilled workers and low skilled workers are complement inputs in most production processes, these policies tend to increase the wage of skilled workers.

a, b, true

1. Immigrants make up about what fraction of the US population? a. 1% b. 5% c. 10% d. 25%

c

1. Which of the following is NOT a good example of a "mandated benefit"? a. Medicare, the program that provides health insurance for people 65 and older. b. Workers' compensation insurance, which pays for medical care for workers injured on the job c. The ADA requirement of "reasonable accommodation." d. The Family Medical Leave Act, which gives workers the right to unpaid leave from work if they or their family members have health problems. e. All are good examples of mandated benefits

a

11. Which of the following is required by the 1990 American with Disabilities Act? a. Employers must make reasonable accommodations for persons with disabilities. b. Persons with disabilities must work at least part-time to receive their Social Security disability payments. c. Employers are required to hire 1 disabled person for every 1,000 employees. d. Firms with over 100 disabled employees on their payroll receive a tax deduction.

a

12. Immigration has both positive and negative impacts on the economy, and on different groups of people. Which of the following statements about the economic impact of immigration is NOT true: a. Immigrants place a burden on the Social Security system, because they use more in social security benefits than they pay in taxes b. Increasing the number of immigrants allowed into the country tends to lower the wages of immigrants who came in earlier c. Immigration leads to lower wages for low skilled native workers d. Immigration leads to lower prices for US consumers

a

4. Which of the following curves is most elastic? a. The supply curve of shelf stockers at the Kroger store in Okemos b. The supply curve of shelf stockers for all grocery stores in the Lansing area c. The supply curve of unskilled labor in the United States d. The supply curve of college educated labor in the US.

a

7. Based on the article posted on the web and discussed in class, which of the following statements IS NOT TRUE regarding Borjas's analysis of immigration? a. Borjas includes the gains to immigrants in the analysis of the effects of immigration. b. Borjas believes that immigration drives down wages, hurting native workers and benefiting native employers. c. The nation gains a surplus from immigration, but only if immigration causes wages to fall d. Some of the surplus will be shared by all in the form of lower prices.

a

7. The Current Employment Statistics (CES) Survey (or "Establishment Survey", as it is termed in the Coursepack) a. is used to calculate the number of jobs in the economy b. is a survey of households c. includes data on the ethnicity and sex of employed workers d. all of the above

a

7. The data from the Current Population Survey (CPS) differs from the data from the Census in that it a. is collected more often b. focuses only on workers c. is based on a survey of employers d. includes information on a much larger sample of people e. All of the above

a

In class I discussed a type of truck used by the companies that pick up residential trash. The truck has a mechanical arm that picks up a special residential trash container and empties it into the truck. The truck can be operated by one driver, and it replaces the traditional trash trucks that require one driver and at least one (sometimes two) crew members to ride on the back of the truck. The use of this new type of truck by residential trash collection companies has been steadily increasing in recent years. 1. What is the effect of increased use of this new type of trash truck on the market for residential trash collection service? (Think graphically) a. The supply curve for residential trash collection service will shift to the right b. The supply curve for residential trash collection service will shift to the left c. The demand curve for residential trash collection service will shift to the right d. The demand curve for residential trash collection service will shift to the left e. There will be no effect on the supply curve or the demand curve for residential trash collection service 2. (Continued from last question) What is the effect of increased use of this new type of trash truck on the equilibrium price and quantity of residential trash collection? a. Price and quantity will both increase b. Price will increase and quantity will decrease c. price will decrease and quantity will increase d. price and quantity will both decrease e. there will be no effect on either price or quantity of residential trash collection 3. (Continued from last question) How will the increased use of this type of trash truck impact the demand for the labor employed to pick up residential trash? a. Not at all - it will only affect the supply curve for this labor. b. Labor demand will shift left due to a scale effect, and there will be no substitution effect c. Labor demand will shift left due both to a scale effect and a substitution effect d. Labor demand will shift right due to a scale effect, and left due to a substitution effect e. Labor demand will shift left due to a substitution effect, and there will be no scale effect

a, c, d

10. Suppose MSU cafeterias decided in 2006 to provide free coffee for students who live in dorms during finals week. Now the MSU officials want to see if the free coffee has affected the semester GPA of their students. Below is the GPA for the students living on campus and the students who live off-campus (a group that should not be affected by this new rule) before and after the new rule was enacted. Semester GPA On-campus Off-campus Before 3.04 2.96 After 3.06 2.94 What is the Difference-in-Difference estimate of the change in GPA caused by the "free coffee" program? a. Increase by 0.02 b. Increase by 0.04 c. No change d. Decrease by 0.02 e. Decrease by 0.04

b

13. According to the Borjas article on immigration: a. The loss to low wage workers from immigration far outweighs the gain to employers and consumers from immigration b. More recently arrived immigrants tend to be less skilled and educated than the immigrants who arrived in the 1960s and 1970s. c. Society would gain more from immigration if immigrants did not lower the wages of native workers. d. The biggest problem with US immigration policy is that more people come to the country illegally than legally.

b

3. The long run elasticity of demand for a certain type of labor is believed to be .4. This means that other things equal, if the wage for that type of labor went up by 10%, employer demand for that type of labor would a. increase by 25% b. decrease by 4% c. decrease by 40% d. decrease by 25%

b

4. If the Civilian non-institutional population is 10 million, the number employed is 6 million, and the number unemployed is 400,000 (or .4 million), the unemployment rate is a. (6/10) X 100 or 40% b. (.4/6.4) X 100 or 6.25% c. (.4/6) X 100 or 6.67% d. (.4/10) X 100 or 4%

b

8. Other things equal, a given mandated benefit will increase total employer labor costs (wages plus the cost of providing the benefit) by more a. If it is valued more by employees b. If the labor supply curve is more elastic c. If the labor demand curve is more elastic d. All of the above

b

The civilian non-institutional population in Arnor is 12,000,000. The number of these people with paid employment is 8,000,000. The number actively looking for work or waiting to be recalled to a job is 1 million. 8. The unemployment rate in Arnor is a. 9/12, or 75% b. 1/9 or 11.1% c. 1/12, or 8.3 % d. 8/12 or 66.7% e. 4/12 or 33.3% 9. The labor force participation rate in Arnor is a. 9/12, or 75% b. 1/9 or 11.1% c. 1/12, or 8.3 % d. 8/12 or 66% e. 4/12 or 33.3%

b, a

1. When a shift in labor demand caused the wages paid to coal miners in a labor market to rise by 12%, the number of coal miners employed rose by 6% over the next six months. From this you can conclude that over a six month period: a. The elasticity of supply of coal miners is 2 b. The elasticity of demand for coal miners is .5 c. The elasticity of supply of coal miners is .5 d. The elasticity of demand for coal miners 2

c

1. When the wage for truck drivers increases by 5%, the number of truck drivers that employers want to hire decreases by 4%. What is the elasticity of labor demand for truck drivers? a. Elasticity of labor demand is 5.0. b. Elasticity of labor demand is 1.25 c. Elasticity of labor demand is 0.80. d. Elasticity of labor demand is 0.20.

c

10. According to my lecture and the Deleire reading, which of the following is the most likely explanation for the decline in employment among the disabled following passage of the ADA? a. It turns out that disabled people don't actually want to work. b. Congress under-estimated how much people dislike working with disabled co-workers. c. The ADA increased the cost of employing disabled workers, which shifted the demand for disabled workers. d. The government under-estimated the number of disabled workers.

c

2. Experience has shown that almost all unskilled immigrant males who come to this country take jobs and work no matter how low the available wage for unskilled work. This implies that a. The demand for low skilled immigrant males is elastic b. The supply of low skilled immigrant males is elastic c. The supply of low skilled immigrant males is inelastic d. Immigrants face employment discrimination

c

5. US immigration policy: a. Uses a "point system" based on skills and income to decide who may legally immigrate to the US b. Requires potential immigrants to have proof of employment before they are legally admitted c. Gives preferential treatment to applicants who have family members already living in the United States d. Is about the same today as it was 100 years ago

c

5. Which of the following factors leads to a less elastic labor demand curve? a. Lots of substitutes for the product produced by that labor b. A less broad definition of the labor market being analyzed c. A less elastic product demand curve d. A less elastic labor supply curve e. All of the above

c

7. Suppose the government mandates that employers provide workers with a costly benefit. The value to workers of the benefit is about half of the cost to employers of providing it. Supply and demand theory predicts that: a. The mandated benefit will shift the labor supply curve upward b. The mandated benefit will lead to lower wages for workers, but will not change employment. c. The mandated benefit will lead to lower wages for workers, and a higher cost of labor for employers. d. The mandated benefit will lead to higher wages for workers, but leave employment unchanged. e. The mandated benefit will not change employer labor costs, but will only change the mix between wage compensation and non-wage compensation.

c

8. Which of the following statements regarding government budgets and immigrants is FALSE? a. Overall, immigrants pay more in taxes than they receive in government benefits. b. State and local governments have a net budget loss from immigration. c. Immigration further threatens the solvency of Social Security. d. Immigrants use programs such as welfare and health care that are funded through the government.

c

Assume the market for nurses is perfectly competitive and is represented in the graph below. There is an equilibrium with 700 employed nurses, and they earn $50,000 per year. Then, a law is passed requiring hospitals to provide child care to their nurses, and the cost of this care averages $4000 per nurse. The average nurse places a value of $4000 per year on this new benefit. This shifts the labor supply and labor demand curves to S1 and D1 as shown on the graph. (graph on desktop 1) 3. If wages can change in this market, what will be the level of employment for nurses in the new equilibrium? a. 300 b. 400 c. 700 d. 800 e. 1000 4. If wages can change in this market, what will be the level of earnings for nurses in the new equilibrium? a. $54,000 b. $50,000 c. $46,000 d. $42,000 e. $40,000 5. If wages cannot be changed in this market what will be the level of employment for nurses in the new equilibrium? a. 300 b. 400 c. 700 d. 800 e. 1000 6. If wages cannot be changed in this market what will be the employer' annual cost of employing a nurse? a. $58,000 b. $54,000 c. $50,000 d. $46,000 e. $42,000

c, c, a, b

1. In an article published in the Wall Street Journal in July 2012, group of executives of major steel industries complained that demand for their product was falling and their profits were falling as well. According to economic theory, a fall in demand for steel would cause: a. The supply curve of steel workers to shift to the right b. The supply curve of steel workers to shift to the left c. The demand curve for steel workers to shift to the right d. The demand curve for steel workers to shift to the left. e. Changes in the demand for steel will have no effect on the market for steel workers.

d

3. Assume that the demand for take-out pizza is more elastic than the demand for meals at mid-price restaurants like Applebee's. This implies that a. The demand for pizza delivery workers is less elastic than the demand for waitstaff at mid-price restaurants. b. The supply of pizza delivery workers is less elastic than the supply of waitstaff at mid-price restaurants c. The supply of pizza delivery workers is more elastic than the supply of waitstaff at mid-price restaurants d. The demand for pizza delivery workers is more elastic than the demand for waitstaff at mid-price restaurants

d

3. Compared to the immigrants who came into the United States during the 1960s and 1970s, the immigrants coming today are a. Less educated b. Less likely to come from Europe c. more likely to settle in California or Texas d. All of the above

d

6. In the graph above, what does area X represent? (on desktop 3) a. Consumer surplus b. Producer surplus c. Employer surplus d. Worker surplus

d

8. The employment rate, also known as the employment to population ratio, a. is calculated from the CES survey of business establishments b. tells the percentage of the civilian non-institutional population that is either employed or unemployed. c. tells the percentage of the labor force that is actively seeking work or waiting to be recalled to a job d. tells the percentage of the civilian non-institutional population that is employed e. none of the above

d

9. The graph above represents the reaction of the market for skilled labor to an increase in the number of unskilled immigrants. The demand curve is believed to move right on this graph because: (on desktop 4) a. The immigration leads to an increase in the employment of unskilled laborers, and this increases the demand for skilled workers to supervise these laborers b. Immigrants are consumers as well as workers, and so immigration increases the demand for many products that are produced with skilled labor c. For the economy as a whole, skilled labor and unskilled labor are complements d. all of the above.

d

Assume the market for teachers in a town is perfectly competitive and is represented in the graph below. In the initial equilibrium, there are 400 employed teachers, and they earn $30,000 per year. (on desktop 2) 1. Suppose that it is mandated that schools subsidize child care for teachers with children. The subsidy costs the school $2,000 per teacher per year, and shifts the labor demand curve from D0 to D1. If wages cannot fall, how many teachers will be employed after the change? a. 410 b. 380 c. 370 d. 350 2. If wages can change and teachers value the child care subsidy by less than $2000, so that supply shifts from S0 to S1 , how many teachers will be employed after the change? a. 370 b. 380 c. 400 d. 410 3. If wages can change and teachers value the child care subsidy by less than $2000, so that supply shifts from S0 to S1, what will be the new equilibrium salary for teachers? a. $27,500 b. $28,500 c. $29,000 d. $30,000

d, b, a

2. During 2009-2010, most commercial airlines started to charge $25 or more per bag to check a bag on a flight. To avoid the charge, you need to carry your bag onto the plane and stow it in an overhead bin. What would you predict to be the effect of these bag charges on the market for baggage handlers, that is, the people who load bags on and off planes? a. The supply curve of baggage handlers will shift to the right b. The supply curve of baggage handlers will shift to the left c. The demand curve for baggage handlers will shift to the right d. The demand curve for baggage handlers will shift to the left. e. Bag charges will have no effect on the market for baggage handlers. 3. (Continued from the last question) What will be the effect of bag charges on the market equilibrium level of wages and employment for baggage handlers? a. Employment will rise and wages will fall b. Employment will rise and wages will rise c. Employment will fall and wages will rise d. Employment will fall and wages will fall e. there will be no change in equilibrium wages or employment.

d, d

15. According to economic theory, a policy that drastically reduced the number of immigrants allowed into the US would a. Negatively affect employers as a group b. lead to higher prices of some consumer products c. lead to higher wages for low skilled native workers d. lead to a fall in demand for more educated workers e. all of the above.

e

6. The Current Population Survey (CPS) a. is a survey of households b. is conducted on a monthly basis c. is used to calculate the unemployment rate d, has information about the earnings and education of the survey respondents e. all of the above

e

9. When the government mandates that employers in a certain industry provide workers with a benefit they have not previously been providing: a. It can lead to a fall in the wages paid to people employed in that industry b. It can lead to higher prices of the product produced by that industry c. It can lead to lower employment in the industry d. It can lead to higher total labor costs for employers in that industry e. All of the above

e

10. True or False: If the employment rate in an economy goes up, the unemployment rate must go down.

false

10. True or False: If the wages actually paid to unskilled workers rose by 7% between 2005 and 2018, and there was 5% inflation in consumer prices over the same period, economists would say that real wages fell for unskilled workers over the period.

false

10. True or False: Immigrants do not displace native workers, because they take jobs that would not be offered by employers at the wage levels that native workers would demand.

false

2. True or false: there is no evidence that the Pregnancy Discrimination Act led to lower wages for women.

false

4. True or False: The higher the value placed on the mandated child care benefit by the teachers in the previous example, the more employment will fall as a result of the mandated benefit.

false

4. True or false: Experts believe that since the year 2000, more immigrants have entered the US illegally than legally.

false

6. True or False: Most workers who are protected by the ADA are either blind or confined to a wheelchair.

false

7. True or False. If the price of an input that is a complement to a certain type of labor decreases, it will cause both a scale and a substitution effect on the demand for that type of labor, and these two effects will shift the labor demand curves in opposite directions.

false

7. True or False: If wages can change in this market, no nurse is really worse off as a result of the mandated child care benefit, because equilibrium employment does not change, and the change in wages is offset by the value of the benefit.

false

8. In some states, a person must have a special "kennel operator" license in order to work as a "pet sitter" taking care of other people's pets. It is costly in terms of time and money to get such a license. True or False: Economic theory predicts that in states that require pet sitters to get the kennel operator license there will be fewer pet sitters per capita, and they will earn less money per hour, than in states that do not require pet sitters to have a license.

false

10. True or false: Other things equal, the unemployment rate will rise if people who were considered out of the labor force begin to actively seek work.

true

11. True or False: Economic theory predicts that reducing the number of immigrants allowed into the US would lead to lower levels of employment, other things equal.

true

14. True or False: Among the people who benefit from immigration are the immigrants themselves.

true

2. True or False: The number of immigrants coming into the United States each year is at a historically high level.

true

2. True or false: With respect to the last question, if demand in this labor market for coal miners did not shift again, by the end of the year the increase in employment would be more than 6%

true

4. True or false: Economic theory alone does not predict whether the equilibrium employment of people working as residential trash collectors will rise or fall as a result of the increased use of the new type of truck.

true

5. True or False: As a result of the Americans with Disabilities Act (ADA), if a disabled person believes that an employer has discriminated against him because of his disability, the disabled person has a right to sue the employer.

true

5. True or false: if it is cheap or relatively easy to replace a certain type of labor with another type of input, the demand for that type of labor will be more elastic.

true

6. Some fast food companies are experimenting with a system in which customer orders at drive through windows are taken by very low-wage workers in call centers in other countries. (Workers in the restaurant must still make the food, take orders inside the restaurant, and so on). This change has the potential to considerably lower the cost of running a fast food restaurant. True or False. If this change becomes wide spread, it is theoretically possible that it could increase the demand for fast food workers in the US.

true

6. True or false: The demand for construction workers in the city of Lansing is more elastic than the demand for construction workers in the state of Michigan.

true

8. True or False: A mandated benefit will lead to a larger fall in employment when labor supply is more elastic.

true

8. True or False: It is possible for employment in a labor market to fall even if no one working in that labor market actually loses their job.

true

9. True or False: Economists believe that some of the cost of a mandated benefit is paid for by consumers in the form of higher prices.

true

9. True or False: If the government of a state increases the minimum wage, economic theory predicts that this will cause both a scale effect and a substitution effect, both of which reduce the number of workers demanded in that state for jobs that pay the minimum wage.

true

9. True or false: If the average wage of truck drivers rose by 5% between 2010 and 2015, and there was 8% inflation over the same period, economists would say that the real wages of truck drivers had fallen over that period.

true

9. True or false: the less elastic the labor supply curve, the less the equilibrium level of employment will be changed by any given labor demand shift.

true