Deck 2: Overview of the Labor Market

Question 1

If the salaries of accountants increase and other conditions remain the same,then

A) a firm will move to the left along its labor demand curve for accountants.
B) a firm will move to the right along its labor demand curve for accountants.
C) the labor demand curve for accountants will shift to the left.
D) the labor demand curve for accountants will shift to the right.

Answer 1

A

Question 2

The labor force is made up of

A) all members of society.
B) all members of society who are at least 16 years of age.
C) all members of society who are at least 16 years old and are either employed or unemployed.
D) employed workers, unemployed workers, and retired workers.

Answer 2

C

Question 3

Because workers choose between various employers offering the same type of job based primarily on wages,

A) the market demand curve for chefs is downward sloping.
B) the market supply curve for chefs is upward sloping.
C) the firm supply curve for chefs is vertical.
D) the firm supply curve for chefs is horizontal.

Answer 3

D

Question 4

Table 2.1
$$\begin{array} { l c } \text { Population: } & 260 \text { million } \\\text { Employed: } & 130 \text { million } \\\text { Unemployed: } & 10 \text { million } \\\text { Retired: } & 35 \text { million } \\\text { Under Age 16: } & 60 \text { million }\end{array}$$

-Given the data in Table 2.1,the labor force participation rate is

A) 54%.
B) 65%.
C) 70%.
D) 80%.

Question 5

Because workers have varying preferences about the type of work they like to do,

A) the market demand curve for chefs is downward sloping.
B) the market supply curve for chefs is upward sloping.
C) the firm supply curve for chefs is vertical.
D) the firm supply curve for chefs is horizontal.

Question 6

When the price of labor falls,the quantity of ________ demanded will ________,but the effect on ________ is ambiguous.

A) labor; increase; capital
B) labor; decrease; capital
C) capital; increase; labor
D) capital; decrease; labor

Question 7

Table 2.1
$$\begin{array} { l c } \text { Population: } & 260 \text { million } \\\text { Employed: } & 130 \text { million } \\\text { Unemployed: } & 10 \text { million } \\\text { Retired: } & 35 \text { million } \\\text { Under Age 16: } & 60 \text { million }\end{array}$$

-Given the data in Table 2.1,the unemployment rate is

A) 3.8%.
B) 5.0%.
C) 7.1%.
D) 7.8%.

Question 8

Table 2.2 Workers in the Widget Industry
$$\begin{array} { l c r } \hline \text { Year } & \text { Earnings } & \text { CPI } \\\hline 1966 & \$ 8,000 & 60 \\1976 & \$ 15,000 & 100 \\1986 & \$ 22,500 & 178 \\1996 & \$ 30,000 & 205 \\\hline\end{array}$$

-According to Table 2.2,real earnings in the Widget Industry in 1986 were

A) $22,500.
B) $12,640.
C) $11,538.
D) $15,730.

Question 9

When the price of capital increases,the quantity of ________ demanded will ________,but the effect on ________ is ambiguous.

A) labor; increase; capital
B) labor; decrease; capital
C) capital; increase; labor
D) capital; decrease; labor

Question 10

A worker's income is equal to his

A) earnings.
B) wage rate multiplied by hours worked.
C) wages plus benefits.
D) earnings plus employee benefits plus unearned income.

Question 11

When wages increase,the substitution effect implies that employment will ________ and the scale effect implies that employment will ________.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question 12

During the twentieth century,the unemployment rate in the United States

A) remained roughly constant.
B) was consistently higher than in other industrialized countries.
C) generally decreased.
D) became more stable.

Question 13

If more people enter the labor market for architects,then

A) both the wage rate and the employment level will increase.
B) both the wage rate and the employment level will decrease.
C) the wage rate will increase and the employment level will decrease.
D) the wage rate will decrease and the employment level will increase.

Question 14

Table 2.2 Workers in the Widget Industry
$$\begin{array} { l c r } \hline \text { Year } & \text { Earnings } & \text { CPI } \\\hline 1966 & \$ 8,000 & 60 \\1976 & \$ 15,000 & 100 \\1986 & \$ 22,500 & 178 \\1996 & \$ 30,000 & 205 \\\hline\end{array}$$

-According to Table 2.2,in which year were the real earnings of workers in the Widget Industry highest?

A) 1966
B) 1976
C) 1986
D) 1996

Question 15

Long-term unemployment rates are higher in most Western European countries than in the United States because

A) unemployment rates are calculated differently in Western Europe.
B) nonmarket forces keep wages in Western Europe above the equilibrium level.
C) technological change has accelerated more quickly in Western Europe.
D) most Western European governments hire workers to perform jobs that are not in demand.

Question 16

The labor market for mechanical engineers is

A) an internal labor market.
B) a national labor market.
C) a local labor market.
D) a monopoly labor market.

Question 17

If a single small firm's demand for secretaries increases,then

A) its wage rate will increase and its employment level will remain the same.
B) its wage rate will increase and its employment level will increase.
C) its wage rate will remain the same and its employment level will increase.
D) both its wage rate and its employment level will remain the same.

Question 18

A worker's total compensation consists of

A) wages.
B) earnings.
C) earnings plus in-kind benefits.
D) earnings plus in-kind benefits plus deferred benefits.

Question 19

If the price of a product decreases due to a decrease in demand,then

A) the firm moves to the left along the labor demand curve.
B) the firm moves to the right along the labor demand curve.
C) the labor demand curve shifts to the left.
D) the labor demand curve shifts to the right.

Question 20

The labor market does NOT

A) allocate workers to jobs.
B) coordinate employment decisions.
C) respond to price signals.
D) ensure that all workers are hired.

Question 21

If unions raise wages above their market clearing level,then

A) more workers will be able to get better jobs, increasing employment.
B) there will be a shortage of workers.
C) persistently high rates of unemployment will result.
D) this will be Pareto efficient.

Question 22

It has been said that CEOs (Chief Executive Officers who are in charge of their firms)are overpaid.Which of the following would be evidence (if true)that they are,in fact,overpaid?

A) CEOs make many times what their workers make.
B) Firms find that they can find equally qualified persons for a lower salary.
C) CEOs' salaries have increased very rapidly.
D) When CEOs leave their jobs to take new jobs, their new jobs pay more.

Question 23

If a union negotiates an industry-wide agreement to set wages above the equilibrium level,

A) the industry's demand curve for labor will shift inward.
B) there will be a surplus of labor in the industry.
C) there will be a shortage of labor in the industry.
D) there will be neither a shortage nor a surplus of labor in the industry.

Question 24

If every worker wants ten dollars more per hour to work,then wages will

A) go up by $10.
B) go up by more than $10.
C) go up by less than $10.
D) go down as employment falls.

Question 25

In the Widget industry,it takes two workers (with other inputs)to produce each widget and since consumers demand 1000 widgets at its current price,2000 workers are employed in the industry.Which of the following could occur if the price of capital falls and labor and capital are substitutes in production?

A) It takes 2.2 workers per widget and 1200 widgets are produced and sold.
B) It takes 1.9 workers per widget and 1200 widgets are produced and sold.
C) It takes 2.2 workers per widget and 900 widgets are produced and sold.
D) It takes 1.9 workers per widget and 900 widgets are produced and sold.

Question 26

Economic rent is

A) the value of a worker's labor services.
B) a worker's wage rate.
C) the income a worker receives from his or her labor.
D) the amount by which a worker's wage exceeds his or her reservation wage.

Question 27

If the price of capital increases in an industry and the scale effect dominates,

A) wages and employment levels will both increase.
B) wages and employment levels will both decrease.
C) wages will increase and employment levels will decrease.
D) wages will decrease and employment levels will increase.

Question 28

Which of the following events will cause a surplus of workers?

A) a wage above the market-clearing wage
B) an increase in the supply of workers
C) a decrease in the demand for workers
D) more workers wanting to work at higher wages

Question 29

Suppose that there are 254 million people in the population aged 16 and over.Further suppose that 150 million people have jobs and that 10 million people are unemployed.What is the unemployment rate? How many people are not in the labor force?

Question 30

"Police persons are finding more lucrative and diverse alternative careers in the private sector." If this statement is true,then the supply curve of labor to policing will likely shift ________ and become ________ steep.Select the best pair of answers.

A) left; less
B) left; more
C) right; more
D) right; less

Question 31

What are the two basic types of employee benefit that workers receive? Give examples of each.

Question 32

Which of the following events will cause the labor demand curve to shift up and to the right?

A) a lower wage
B) an increase in product demand
C) an increase in the supply of labor
D) all of the above shift the labor demand curve up

Question 33

Suppose that the average hourly wage rate in 1980 is $6.85 per hour and that it is $10.20 per hour in 1990.Furthermore,suppose that the consumer price index is 82.4 in 1980 and that it is 130.7 in 1990.Based on the information given,the purchasing power of American worker earnings increased during the 1980s.True or false? Explain.

Question 34

How is the monthly unemployment rate determined in the United States?

Question 35

It has been said that teaching assistants to professors are underpaid.Which of the following would be evidence (if true)that they are underpaid?

A) There is a surplus of teaching assistants.
B) Teaching assistants are paid far less than professors, even though they are doing similar work.
C) Teaching assistants are made to work more than other workers in their job.
D) Professors have a hard time finding qualified teaching assistants.

Question 36

Which area pays the highest real wage?

A) Nominal Wage $15; Consumer Price Index for Area 50
B) Nominal Wage $20; Consumer Price Index for Area 100
C) Nominal Wage $25; Consumer Price Index for Area 150
D) Nominal Wage $50; Consumer Price Index for Area 200

Question 37

Workers in an industry are probably underpaid if

A) employers have difficulty hiring and retaining qualified workers.
B) the workers cannot afford to quit their jobs.
C) the workers could receive a higher salary in another occupation.
D) firms in the industry are making a positive profit.

Question 38

Which of the following occurs if a firm pays workers more than the market wage?

A) Its application rate will be higher than usual.
B) Its quit rate will be lower than usual.
C) It will have a surplus of labor.
D) All of above occur.

Question 39

Which of these persons is officially classified as being "not in the labor force"?

A) Alex, who was fired from his job two months ago and is searching for a new job.
B) Bob, who would start looking for work if he thought he could get a good job.
C) Cole, who has never worked but just started looking for work two weeks ago.
D) Durk, who is working at a low wage job that does not challenge him.

Question 40

Which of the following events could explain why wages and employment could fall in a competitive labor market?

A) The demand curve shifts right and up.
B) The demand curve shifts left and down.
C) The supply curve shifts left and up.
D) The supply curve shifts right and down.

Question 41

Nonmarket forces can prevent a labor market from achieving equilibrium.Explain.

Question 42

Suppose the price of capital in the restaurant industry decreases.Explain how the decrease in the price of capital affects the demand for labor in the restaurant industry.

Question 43

Suppose the labor supply curve is as follows.The labor supply curve is perfectly elastic at an hourly wage of $8 per hour over the first 100 workers.If more than 100 workers are to be attracted,a wage greater than $8 per hour must be paid.For example,if the wage is $10 per hour,then labor supply is 150 workers.If the wage is $16 per hour,then labor supply is 300 workers.Draw the labor supply curve described.What is the economic rent in the labor market if a wage of $10 per hour is paid and 150 workers are employed? Explain.What is the economic rent if a wage of $16 per hour is paid and 300 workers are employed? Explain.

Question 44

Draw a hypothetical labor demand curve for machinists in the aircraft industry.What is being held constant in drawing your labor demand curve? Why does the curve look as you have drawn it? Why does the shape of this curve depend on the period of time (short run versus long run)under consideration?

Question 45

The supply of a particular type of labor to a firm is less elastic than the supply of labor to the market.True,false,or uncertain? Explain.

Question 46

Suppose that a burst of technological advancement and innovation occurs that increases the demand for highly skilled labor.Use demand/supply analysis to analyze the effect of the technological change on the equilibrium wage and equilibrium employment levels for high skill workers.