Question 1

An increase in unemployment insurance benefits will:
A) increase the demand for labor.
B) decrease the demand for labor.
C) increase job search efforts of unemployed workers.
D) decrease job search efforts of unemployed workers.

Accepted Answer

An increase in unemployment insurance benefits will make the unemployed feel that they do not need to find a new job quickly since the benefits they are receiving may be enough to sustain them, and hence, decrease their job search efforts.

Question 2

Structural unemployment is increased when the wage is kept above the market-clearing wage by:
A) unemployment insurance.
B) worker mobility.
C) skill-biased technological change.
D) labor unions.

Accepted Answer

Labor unions negotiate wages above the market-clearing level, which results in excess supply of labor, causing structural unemployment.

Question 3

Health and safety regulations in the labor market:
A) are always efficient because they improve working conditions.
B) should be evaluated by comparing their costs to their benefits.
C) are necessarily inefficient if they impose additional costs on employers.
D) can lead to an increase in frictional unemployment.

Accepted Answer

Health and safety regulations in the labor market should be evaluated by comparing their costs to their benefits. While they can improve working conditions, they can also impose additional costs on employers, potentially leading to an increase in frictional unemployment. It is important to weigh the benefits of the regulations against the costs in order to determine their overall effectiveness.

Question 4

Assume that the union wage already exceeds the market-clearing wage. If the union wage is increased, holding other factors constant, then the number unemployed ______ and the number employed _____.
A) increase; increases
B) increases; decreases
C) increases; does not change
D) decreases; increases

Accepted Answer

If the union wage already exceeds the market-clearing wage, then increasing the union wage will make it even higher relative to the market-clearing wage. This will cause firms to hire less labor and possibly lay off some workers, resulting in an increase in the number of unemployed (hence the increase in option B) and a decrease in the number of employed (hence the decrease in option B).

Question 5

Assume the minimum wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of workers who are unemployed will ______ and the number of workers who are employed will _______.
A) increase; increase
B) increase; decrease
C) increase, not change
D) decrease; increase

Accepted Answer

Since the minimum wage exceeds the market-clearing wage, there are already some workers who are unemployed. If there is an increase in the labor supply, this will lead to more competition among workers for a limited number of jobs, but since the minimum wage is already higher than the market-clearing wage, firms will not be able to hire any additional workers at the higher wage. Therefore, the number of workers who are employed will not change, while the number of workers who are unemployed will increase.

Question 6

When unemployment insurance benefits exceed the wages a worker could earn when employed, the worker will have an incentive to:
A) remain unemployed longer than otherwise.
B) have his/her unemployment insurance benefits cancelled.
C) accept the first job offered.
D) decrease his/her reservation price.

Accepted Answer

If unemployment insurance benefits exceed the wages a worker could earn when employed, it creates a disincentive to accept a job offer and return to work. Instead, the worker may choose to remain unemployed longer than otherwise. This can create a situation where the unemployed worker becomes less productive over time and finds it increasingly difficult to transition back into the workforce.

Question 7

If there is a floor on wages created by a minimum wage, union contracts, or other factors, then a decline in the marginal productivity of low-skilled workers will ______ the demand for low-skilled workers and ______ the number of unemployed workers.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

Accepted Answer

A decline in the marginal productivity of low-skilled workers will decrease the demand for low-skilled workers, as they become less valuable to employers. This will lead to an increase in the number of unemployed workers, as there are fewer job opportunities available. The floor on wages created by minimum wage laws or union contracts can prevent wages from falling to the level where employers would continue to demand low-skilled workers despite their decreased productivity. However, this does not change the fact that a decline in productivity will lead to a decrease in demand for those workers.

Question 8

Unemployment insurance contributes to structural unemployment by:
A) keeping wages above the market-clearing level.
B) keeping wages below the market-clearing level.
C) allowing unemployed workers to search longer or less intensively for jobs.
D) forcing unemployed workers to take the first job offered to them.

Accepted Answer

Unemployment insurance provides financial support to individuals who are unemployed, which can reduce their urgency or need to find work. This can lead to longer, less intensive job searches, which may contribute to structural unemployment. By contrast, options A and B are associated with a wage floor and a wage ceiling, respectively, which can affect prices and quantities in the labor market but do not necessarily contribute to structural unemployment. Option D is not a common feature of unemployment insurance programs and is unlikely to be a significant factor in contributing to structural unemployment.

Question 9

Government regulations that increase the cost to the employer of hiring workers will:
A) increase the demand for labor.
B) decrease the demand for labor.
C) increase the supply of labor.
D) decrease the supply of labor.

Accepted Answer

When the cost of hiring workers increases due to government regulations, the employer is less likely to hire workers. This means that the demand for labor will decrease as employers will try to cut back on it. Therefore, option B is the correct choice.

Question 10

Minimum wage laws contribute to structural unemployment by:
A) keeping wages above the market-clearing level.
B) keeping wages below the market-clearing level.
C) allowing unemployed workers to search longer or less intensively for jobs.
D) forcing unemployed workers to take the first job offered to them.

Accepted Answer

Minimum wage laws set a legal minimum for wages, often above the market-clearing level. This means employers may not be able to hire as many workers as they would like since they cannot afford to pay all of them the minimum wage. As a result, some workers may be left unemployed or may have to work fewer hours than they would like. This type of unemployment is known as structural unemployment, which is caused by a mismatch between the skills of job seekers and the skills required for available jobs.

Question 11

Government health and safety regulations or anti-discrimination laws can reduce real wages by:
A) decreasing the demand for labor.
B) decreasing the supply of labor.
C) reducing employer costs.
D) increasing worker productivity.

Accepted Answer

Government laws and regulations sometimes discourage employers from hiring. These laws and regulations effectively shift the demand for labor to the left.

Question 12

Labor unions contribute to structural unemployment by:
A) keeping wages above the market-clearing level.
B) keeping wages below the market-clearing level.
C) allowing unemployed workers to search longer or less intensively for jobs.
D) forcing unemployed workers to take the first job offered to them.

Accepted Answer

Labor unions negotiate higher wages and benefits for their members, which can lead to employers hiring fewer workers or laying off existing employees to afford the higher costs. This can create structural unemployment as there are more workers seeking jobs than there are available positions at the inflated wage levels.

Question 13

Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of unemployed workers will ______ and the number of employed workers will _______.
A) increase; increase
B) increase; decrease
C) increase; not change
D) decrease; increase

Accepted Answer

The answer of Assume the union contract wage exceeds the...

Question 14

Structural unemployment will decrease when:
A) the minimum wage is increased.
B) the minimum wage is decreased.
C) unemployment insurance benefits are increased.
D) union wages are increased.

Accepted Answer

Structural unemployment is caused by a mismatch between the skills and qualifications of workers and the available jobs. Decreasing the minimum wage can encourage employers to hire more workers, including those with less specialized skills, which can help reduce structural unemployment. Increasing the minimum wage, unemployment insurance benefits, or union wages can actually exacerbate the problem by making it more expensive for firms to hire workers, which can lead to more job losses and exacerbate the skills mismatch.

Quiz 6: Measuring the Price Level and Inflation

An increase in unemployment insurance benefits will:

Structural unemployment is increased when the wage is kept above the market-clearing wage by:

Health and safety regulations in the labor market:

Assume that the union wage already exceeds the market-clearing wage. If the union wage is increased, holding other factors constant, then the number unemployed __ and the number employed _.

Assume the minimum wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of workers who are unemployed will and the number of workers who are employed will _.

When unemployment insurance benefits exceed the wages a worker could earn when employed, the worker will have an incentive to:

If there is a floor on wages created by a minimum wage, union contracts, or other factors, then a decline in the marginal productivity of low-skilled workers will the demand for low-skilled workers and the number of unemployed workers.

Unemployment insurance contributes to structural unemployment by:

Government regulations that increase the cost to the employer of hiring workers will:

Minimum wage laws contribute to structural unemployment by:

Government health and safety regulations or anti-discrimination laws can reduce real wages by:

Labor unions contribute to structural unemployment by:

Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of unemployed workers will and the number of employed workers will _.

Structural unemployment will decrease when: