ECON 252 Chapter 9

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 the wage *A change in wage, since wages are the price of labor, is a movement up or down an existing labor demand curve. Conversely, an increase in human capital or a change in technology both make labor more productive at each wage rate level and hence will shift the demand for labor to the right.*

Which of these persons is officially unemployed?

A non-working individual who has looked for a job in the past week *A non-working individual who has looked for a job in the past week is officially unemployed. They are actively seeking work so considered to be in the labor force. The housewife and student will not be considered unemployed until they join the labor force by actively seeking a job.*

If the current wage is above the market clearing-wage, there is __________ in the labor market.

A surplus of labor *The market clearing-wage is the equilbirum wage (at which the quantity demanded equals the quantity supplied of labor). At wages higher than the market-clearing wage, quantity supplied exceeds quantity demanded of labor, resulting in a surplus of labor. At wages lower than the market-clearing wage, quantity demanded exceeds quantity supplied of labor, resulting in a shortage of labor.*

Which of these factors can cause the natural rate of unemployment to change?

Demographic changes

When the economy is at full employment, which types of unemployment remain?

Frictional and structural

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 the minimum wage *Increasing the minimum wage can cause an increase in the levels of frictional and structural unemployment. A higher minimum wage means that firms may opt to fire the workers that no longer provide a marginal benefit greater than their marginal cost. At the very least, a firm may not replace a worker when they quit but instead require the existing employees to assume those responsibilities.*

Out of the following people, who is not considered a potential worker?

Joe, who is currently serving a prison sentence for robbery *Potential workers are comprised of the civilian non-institutional population 16 years old and over.*

What is the correct expression for calculating the Labor Force Participation Rate?

Labor Force Participation Rate = 100% * [(Employed+ Unemployed)/Potential Workers]

Which of these graphs best depicts the impact of an increase in immigration on the labor market?

Shift supply of labor right

Which of these groups is included in the labor force?

The unemployed

Which of the following is the equivalent of the demand curve for labor?

The value of the marginal product of labor *The factor that determines whether a firm should hire more workers is not the actual output of that worker (marginal product of labor) but instead the amount of additional revenue that the worker generates (which gives the value of the marginal product of labor). The firm will benefit from hiring more workers as long as the value of the marginal product of labor is greater than the wage rate.*

What is the correct expression for calculating the unemployment rate?

Unemployment rate = 100% * [Unemployed/ (Employed+ Unemployed)]

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 *Let VMPL equal the value of the marginal product of labor (also known as the marginal revenue product) and W equal the wage rate. A firm should hire more workers to increase profit when VMPL > W. In other words, as long as the next unit of labor is generating more marginal revenue than it costs to hire that labor the firm will be better off to hire that worker. If VMPL < W, then the firm will be losing money to hire that next worker. A firm should continue hiring additional workers until it gets to the point where VMPL = W.*

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

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 *The rightward shift in the labor supply will result in a new equilibrium point that is consistent with a movement down the current labor demand curve. Wages will be lower but more workers will be employed at this new equilibrium point.*

As the number of workers increases, the marginal product of labor __________ and the marginal revenue product of labor __________.

decreases, decreases

As the wage increases, the demand for labor curve:

does not shift, but the quantity demanded for labor decreases *A change in the price of labor is a movement along an existing demand curve. If wages increase, it is a movement up the existing demand curve that will result in a decrease in the quantity demanded for labor.*

The labor market may take a long time to adjust to economic growth due to __________.

excess capacity in production

The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.

frictional unemployment

The "normal or natural" underlying level of unemployment in the economy is the __________.

full employment rate of unemployment

The US data on the unemployment rate since 1948 shows that the unemployment rate tends to ________during_________

increase; recessions

As the population increases, the labor supply curve:

shifts to the right

As technology improves, the demand for labor curve:

shifts to the right *A change in technology makes workers more productive. Over time firms will be willing to add more units of the more productive workers and the demand curve for labor will shift 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

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 *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. If the wage is set above the market rate, then there will be a larger quantity supplied at that rate than is demanded. This leads to a surplus of unskilled labor which is a higher unemployment rate, all other things equal.*