Deck 4: The Demand for Labour; Changing Jobs: The Economics of Job Search

Question 1

The proportionality rule states that

A) In equilibrium it is not possible to substitute labour for capital and vice versa
B) In equilibrium the marginal rate of substitution must equal the ratio of factor prices
C) Skilled and unskilled labour can be substituted for one another up to the point at which their proportions match their relative wages
D) The optimal combination of factors occurs when marginal physical products are proportional to factor prices.

Answer 1

D

Question 2

The substitution effect

A) Is represented by the shift from one isocost line to another when relative factor prices change
B) Is indicated by the scale effect which occurs when the level of output changes
C) Represents a movement along a given isoquant when relative factor prices change
D) Shows how factor proportions change as a result of diminishing returns to labour.

Answer 2

C

Question 3

Manning

A) In a steady state total separations must equal total recruits
B) Wage rates must rise over time
C) The elasticity of the recruitment rate must equal the elasticity of the separation rate
D) The wage elasticity must be greater than one.

Answer 3

A

Question 4

The Marshallian rules of derived demand

A) Assume that the elasticity of the supply of factors other than labour is fixed
B) Assume that the elasticity of substitution is constant
C) Take the elasticity of demand for the final product as given
D) Help to explain the relative bargaining power of employers and trade unions.

Question 5

Employers may prefer a standard workweek plus overtime at a premium wage rate to a fixed hourly rate producing the same wage costs because

A) This will induce employees to work more hours
B) It will make hours reductions easier in a recession
C) It will make it easier to recruit
D) Trade unions favour such an arrangement.

Question 6

Capital utilisation will increase if

A) The rate of obsolescence falls
B) The rate of depreciation of capital falls
C) The rate of interest rises relative to wage rates
D) The elasticity of substitution is greater than one.

Question 7

Walter Oi regarded labour as a quasi fixed factor because

A) Institutional arrangements make it difficult to shed labour in a recession
B) There are fixed labour/machine ratios
C) It does not pay to shed certain types of skilled labour in a recession
D) Non-wage costs exceed wage costs.

Question 8

Labour hoarding

A) Implies a sub-optimal use of labour
B) Is a natural response to a downturn in demand
C) Results from an increase in productivity
D) Is a reaction to technological change.

Question 9

The reservation wage is

A) That wage which will provide a reasonable standard of living
B) The wage which will persuade a worker to accept a job offer
C) A wage which does not vary with non-wage income or the level of unemployment benefits
D) The lowest wage that is acceptable to the worker given his or her circumstances.

Question 10

The matching function

A) Relates the number of workers hired to the unemployment/vacancy ratio
B) Considers which combinations of unemployment and vacancies are optimal
C) Measures the average time it takes an employer to fill a vacancy
D) Measures search intensity.

Question 11

The optimal stopping rule in job search suggests that

A) An individual will cease job search after searching among a fixed number of firms
B) An individual will cease job search after receiving an offer which matches the reservation wage
C) Individuals should continue to search until the expected marginal benefits from continued search equal the expected marginal costs from further search.
D) An individual will continue to sample firms until an acceptable wage is found

Question 12

Regional migration only takes place

A) When he housing market is no dearer than in the region of origin
B) After an employer has offered an individual a job before job search takes place
C) When both push and pull factors are in operation
D) To a region with the highest reservation wage net of distance costs.

Question 13

International migration studies suggest

A) Migrants are a self selected group
B) There is a high degree of international skill transferability
C) There is no discrimination against migrants in terms of employment
D) Earnings differences between the native population and migrants remain constant over time.