Question 1

The unemployment resulting when real wages are held above equilibrium is called _____ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called _____ unemployment.

Accepted Answer

The first type of unemployment described, resulting from real wages being held above equilibrium, is known as structural unemployment. This is because the wage level is leading to an inefficiency in the labor market by creating a surplus of workers who cannot find jobs. The second type of unemployment described, resulting from workers searching for the best job to fit their skills, is known as frictional unemployment. This is because it is due to the difficulties in matching workers with available jobs in a timely manner, creating a level of temporary unemployment.

Question 2

One efficiency-wage theory implies that firms pay high wages because:

Accepted Answer

The efficiency-wage theory suggests that firms pay high wages to motivate workers to perform better, reduce turnover, and increase job satisfaction. This creates a positive work environment and leads to lower costs of hiring and training new workers. Thus, paying high wages can result in greater employee retention, which ultimately benefits employers.

Question 3

When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be _____ the equilibrium wage.

Accepted Answer

When insiders, such as a union, have greater bargaining power than outsiders, they can negotiate wages that are much greater than the market equilibrium wage, leading to higher wage costs for firms.

Question 4

Public policy to increase the job-finding rate includes _____, and public policy to decrease the job-separation rate includes _____.

Accepted Answer

Government employment agencies can help increase the job-finding rate by matching job seekers with employers. A 100 percent experience-rated employment insurance system can decrease the job-separation rate by making employers more accountable for layoffs, thus encouraging them to retain employees.

Question 5

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labour will _____ the number unemployed.

Accepted Answer

When the real wage is above the equilibrium level due to wage rigidity, an increase in the supply of labor will lead to more people willing to work at the current wage, thus increasing unemployment as the quantity of labor supplied exceeds the quantity demanded.

Question 6

All of the following are causes of structural unemployment except:

Accepted Answer

Employment insurance is not a cause of structural unemployment; it is a form of financial support for unemployed individuals. Structural unemployment is typically caused by factors like minimum-wage laws, union power, and efficiency wages, which can create mismatches between workers' skills and job requirements.

Question 7

Centralized union wage bargaining with government intervention in Sweden gives relatively more influence to ______, while firm-level union wage bargaining in Canada gives relatively more influence to ______.

Accepted Answer

The answer of Centralized union wage bargaining with government intervention...

Question 8

Permitting a lower minimum wage for teenagers would likely:

Accepted Answer

Allowing a lower minimum wage for teenagers could make them more attractive to employers compared to unskilled adults, potentially increasing adult unemployment as employers might prefer the cheaper labor provided by teenagers.

Question 9

Wage rigidity:

Accepted Answer

Wage rigidity prevents wages from adjusting to clear the labor market, thus preventing labor demand and supply from reaching equilibrium.

Question 10

In the case of unions, the conflict of interest between different groups of workers results in insiders wanting _____, while outsiders want _____.

Accepted Answer

Insiders (current union members) typically prioritize high wages for themselves, while outsiders (non-union workers or those seeking employment) often desire more hiring opportunities to gain employment or improve their job positions.

Question 11

actively searching for a job to match their skills.
b.
not eligible to receive employment-insurance benefits.
c.
waiting for a job to become available.
d.
relocating to another part of the country as a result of sectoral shifts.
ANSWER:
c
-Which of the following is the best example of structural unemployment?

Accepted Answer

Structural unemployment occurs when there is a mismatch between the skills of the unemployed and the jobs that are available. In this case, Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available. This means that Kirby's skills are not in demand, and he is therefore structurally unemployed.

Question 12

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases.

Accepted Answer

Efficiency-wage theories suggest that paying higher wages can motivate workers to be more productive, as they feel valued and incentivized to work harder. This can result in higher output and profits for the firm in the long run. Higher wages can also attract more skilled workers and reduce turnover, further increasing productivity. Unionization and shirking are not directly related to the benefits of efficiency wages.

Question 13

Unions contribute to structural unemployment when collective bargaining results in wages:

Accepted Answer

Unions can contribute to structural unemployment when they negotiate wages that are above the equilibrium level because employers may not be able to afford to hire as many workers at these higher wages, leading to a surplus of workers at the negotiated wage level.

Question 14

Which of the following statements about minimum-wage workers in Canada is not correct:

Accepted Answer

Minimum-wage workers in Canada are more likely to be female, not male.

Question 15

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:

Accepted Answer

Efficiency-wage theories suggest that paying above-market wages can reduce turnover, improve worker quality, and increase effort, but it does not reduce the firm's wage bill; it increases it.

Question 16

Which of the following policies were adopted by the government in an attempt to reduce the natural rate of unemployment?

Accepted Answer

The answer of Which of the following policies were adopted...

Question 17

According to studies of individual unemployed workers, these workers are most likely to find a job:

Accepted Answer

Studies suggest that unemployed workers are most likely to find a job within a few weeks of their employment insurance running out, as the urgency to secure income increases.

Question 18

When the real wage is above the level that equilibrates supply and demand:

Accepted Answer

When the real wage is above the equilibrium level, the quantity of labor supplied exceeds the quantity demanded, leading to unemployment.

Question 19

The "working home" tax benefit:

Accepted Answer

The "working home" tax benefit is designed to support employees working from home by providing tax relief, which does not directly affect labor costs.

Question 20

Government policies directed at reducing frictional unemployment include:

Accepted Answer

Experience-rated employment insurance encourages firms to retain workers and reduces turnover, thus lowering frictional unemployment.

Quiz 7: Unemployment and the Labour Market

The unemployment resulting when real wages are held above equilibrium is called _ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called _ unemployment.