Question 1

Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Accepted Answer

The answer of Most spells of unemployment are short, and...

Question 2

In 1914, Henry Ford began paying his workers $5 per day, about twice the going wage. As a result, turnover and absenteeism fell and productivity and profits rose.

Accepted Answer

This statement is true. Henry Ford did indeed begin paying his workers $5 per day in 1914, which was about twice the going wage at the time. This decision resulted in a decrease in turnover and absenteeism, and an increase in productivity and profits for the company.

Question 3

Following the recession of 2001, there was a month in which employment and the unemployment rate both rose. Assuming the computations were correct, how is it possible for both to have increased?

Accepted Answer

The answer of Following the recession of 2001, there was...

Question 4

The table below uses data for the year 2003 provided by the Bureau of Labor Statistics and adjusted to be comparable to U.S. data. All values are in thousands. Fill in the blank entries in the table.

Accepted Answer

The answer of The table below uses data for the...

Question 5

Critics of unions argue that unions cause the allocation of labor to be inefficient and inequitable.

Accepted Answer

Critics argue that unions can create rigid work rules and seniority-based promotions, which can limit productivity and prevent high-performing employees from being rewarded. In addition, collective bargaining may result in higher wages for union members at the expense of non-union workers, reducing equity in the labor market.

Question 6

A firm might offer efficiency wages so its workers will eat a more nutritious diet and therefore be healthier and more productive.

Accepted Answer

Offering efficiency wages to encourage workers to eat a more nutritious diet and improve their health and productivity is a valid strategy used by some firms.

Question 7

According to the theory of efficiency wages, firms operate more efficiently if wages are below the equilibrium level.

Accepted Answer

According to the theory of efficiency wages, firms may choose to pay wages above the equilibrium level in order to increase worker productivity, reduce turnover, and attract high-quality employees.

Question 8

The efficiency-wage theory of worker health is more relevant for explaining unemployment in less developed countries than in rich countries.

Accepted Answer

The efficiency-wage theory suggests that paying higher wages to workers can improve their health and productivity, thus reducing turnover and increasing overall efficiency. This theory is more relevant in less developed countries where poor health and high turnover rates are common due to factors such as poor working conditions and lack of access to healthcare. In rich countries, while there may still be a correlation between worker health and productivity, other factors such as automation and outsourcing are also major contributors to unemployment.

Question 9

A firm might offer efficiency wages in order to attract a better pool of applicants.

Accepted Answer

Efficiency wages are wages that are set above the market equilibrium in order to attract and retain higher-quality employees. By offering higher wages, firms hope to attract a larger pool of applicants than they would with lower wages.

Question 10

Why have labor-force participation rates for women in the United States increased since World War II while labor-force participation rates for men have decreased?

Accepted Answer

The answer of Why have labor-force participation rates for women...

Question 11

A firm might offer efficiency wages in order to reduce shirking.

Accepted Answer

Efficiency wages are higher than the market equilibrium wages and are given to employees in order to increase their productivity and reduce shirking behavior. By paying higher wages, the firm is able to attract and retain more dedicated and hardworking employees, and discourage shirking.

Question 12

Most economists believe unions are bad for the economy as a whole.

Accepted Answer

Many economists believe that unions play a crucial role in the economy by helping to raise wages, improve working conditions, and reduce income inequality, which can contribute to a more stable and productive economy.

Question 13

A firm might offer efficiency wages to reduce worker turnover and thereby reduce production costs.

Accepted Answer

Efficiency wages are higher wages paid by firms in order to motivate workers to stay with the company and reduce turnover costs. By reducing turnover, firms can save on the costs associated with recruiting, hiring, and training new employees.

Question 14

According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence of a surplus of labor.

Accepted Answer

Efficiency wage theory suggests that keeping wages above the market-clearing level can lead to increased productivity and decreased turnover, which in turn can offset the costs of higher wages. Therefore, it may be profitable for firms to keep wages high even in the presence of a surplus of labor.

Question 15

Since unemployment rates are consistently higher in Canada and some Western European countries than in the United States, it appears that the natural rate of unemployment is lower in the United States. What might explain this difference?

Accepted Answer

The answer of Since unemployment rates are consistently higher in...

Question 16

Efficiency wages create structural unemployment.

Accepted Answer

Efficiency wages are higher than the market wage rate and are paid to workers with the intention of increasing their productivity and reducing shirking. This leads to a decrease in the demand for labor, as firms hire fewer workers at higher wages. As a result, some workers will be unable to find employment, leading to structural unemployment.

Question 17

Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would attribute at least part of this difference to minimum-wage laws.

Accepted Answer

The answer of Teenage unemployment is higher than unemployment of...

Question 18

Advocates of unions contend that unions are a necessary antidote to the market power of the firms that hire workers and that unions are important for helping firms respond efficiently to workers' concerns.

Accepted Answer

Advocates argue that unions provide a countervailing power to firms and can negotiate for better wages, benefits and working conditions for workers. This can lead to a more equitable distribution of bargaining power between workers and employers, and help to ensure that workers' concerns are taken into account in company decision-making.

Question 19

According to the theory of efficiency wages, firms operate more efficiently if wages are above the equilibrium level.

Accepted Answer

According to the theory of efficiency wages, if firms pay their workers higher wages than the market equilibrium level, they will have a more motivated, productive and reliable workforce, leading to increased levels of efficiency and profits for the company.

Question 20

Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

Accepted Answer

The answer of Why might a favorable change in the...

Quiz 10: Unemployment