Chapter 8: Compensating Wage Differentials and Labor
Markets
Q1) Predictable layoffs
A) will not increase utility for any workers.
B) decrease utility of all workers.
C) decrease utility of risk-averse workers.
D) imply that leisure is an inferior good to all workers.
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Q2) Predictable layoffs
A) will not increase utility for any workers.
B) decrease utility of all workers.
C) decrease utility of risk-averse workers.
D) imply that leisure is an inferior good to all workers.
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Q3) Assume that safety in the workplace is costly to provide for a manufacturing
[Link] an isoprofit curve map for the firm with the wage rate on the vertical axis and
risk of injury on the horizontal [Link] why the graph looks as you have drawn it.
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Chapter 4: Labor Demand Elasticities
Q1) If the quantity of steel workers demanded falls from 30,000 to 20,000 when the
equilibrium wage increases from $9.00 per hour to $11.00 per hour,then the own-wage
elasticity of demand for these workers is
A) -2.0.
B) -0.5.
C) -0.4.
D) -0.2.
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Q2) Other things equal,an elastic demand for an industry's output will tend to make the
industry's own-wage elasticity of demand
A) high.
B) low.
C) positive.
D) zero.
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Q3) If the labor market is competitive and coverage is complete,then legislation to enact
a minimum wage above the equilibrium wage level would
A) increase both wages and employment.
B) decrease both wages and employment.
C) decrease wages and increase employment.
D) increase wages and decrease employment.
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Chapter 5: Frictions in the Labor Market
Q1) A firm is currently employing 10 [Link] hire an 11th worker,it must raise its weekly
pay by $5 and pay the 11th worker $[Link] is the marginal expense of the hiring the 11th
worker?
A) $100
B) $150
C) $105
D) $5
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Q2) What is meant by the term monopsony? Under what circumstances do
monopsonistic conditions arise in the labor market?
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Q3) A quasi-fixed cost of labor is a cost that
A) is expected to change over time.
B) is proportional to the number of hours worked.
C) is proportional to the number of workers hired.
D) is proportional to the amount of capital used.
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Chapter 12: Gender,Race,and Ethnicity in the Labor Market
Q1) In general,women in low-paying jobs tend to earn ________ of male earnings (for
those males in low-paying jobs)than women in high-paying jobs.
A) a higher percentage
B) a lower percentage
C) about the same
D) about the same, but subject to many major exceptions
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Q2) Which of the following CANNOT explain differences in earnings of men and women?
A) experience
B) occupation
C) unobservable characteristics
D) income maximization by all workers
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Q3) How much of the pay gap between full-time male and female workers does the
empirical evidence suggest is explained by differences in observed characteristics
related to productivity?
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Chapter 16: The Labor-Market Effects of International Trade
and Production Sharing
Q1) Elimination of barriers to international transactions tends to reduce the elasticity of
demand for domestic [Link] or false? Explain.
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Q2) Mr.X is a total [Link] is worse at doing everything than anyone [Link] to
the law of comparative advantage,
A) he will not be able to compete with others and will remain unemployed.
B) others will be worse off dealing with Mr. X as he is comparatively inferior.
C) he will be able to get a job but at such a low wage that he will be, on net, worse off.
D) he will be able to compete with others by doing what he is comparatively less worse
at.
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Q3) Lana is a freelance computer consultant who earns $500 per day for her
[Link] is a handyman who could earn $15 per hour at the local hardware
[Link] needs her house [Link] can paint the house in 5 [Link] could paint
Lana's house in 3 days' time ?(8 hours per day).What is Lana's opportunity cost of
painting her own house? What is Larry's opportunity cost for painting Lana's house?
Should Lana paint the house herself?
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Chapter 3: The Demand for Labor
Q1) Consider a firm using three inputs: unskilled labor,skilled labor,and [Link]
labor and capital are substitutes in production,while skilled labor and capital are
complements in [Link] the price of capital decreases,then
A) employment of skilled labor increases and employment of unskilled labor decreases.
B) employment of both skilled and unskilled labor decreases.
C) employment of skilled labor increases but the effect on employment of unskilled
labor is ambiguous.
D) employment of skilled labor could increase or decrease and the employment of
unskilled labor definitely decreases.
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Q2) Suppose that a firm is competitive in both the product market and the labor
[Link] the market determined wage rate decreases,the firm's demand for labor
[Link] why using the marginal productivity theory of input demand.
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Q3) Most of a payroll tax is eventually paid by
A) employers if the supply of labor curve is very inelastic.
B) employers if the labor demand curve is very elastic.
C) workers if the supply of labor curve is very inelastic.
D) workers if the supply of labor curve is very elastic.
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Chapter 15: Inequality in Earnings
Q1) What institutional forces might account for the increase in earnings inequality
observed since 1980? Explain.
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Q2) How can skill-biased technological change account for increased earnings
inequality?
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Q3) Which of the following best describes the statement "Earnings at the 80th percentile
were $20,000"?
A) 80% were earning $20,000 or less.
B) 80% were earning $20,000 or more.
C) The average earnings of those in the top 80% was $20,000.
D) The average earnings of those in the bottom 80% was $20,000.
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Chapter 7: Labor Supply: Household Production, the Family,
and the Life Cycle
Q1) John,a bachelor,after reading a book on homemaking,suddenly becomes twice as
productive in doing household [Link] will likely make his indifference curves
(between income on the vertical axis and household time on the horizontal axis)become
A) flatter.
B) steeper.
C) more bowed in.
D) less bowed in.
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Q2) The monetary value of a homemaker's time CANNOT be estimated by
A) measuring the services in terms of current market prices.
B) comparing the value of the services to the spouse's wage rate.
C) measuring the value of the services by looking at the homemaker's opportunity costs.
D) measuring the marginal value of the services by the homemaker's wage rate
received in a part-time job.
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Q3) Congress is considering providing a child-care subsidy of $50 per week to mothers
that work at least 16 hours per [Link] are the labor market implications of such a
program? Illustrate your discussion with the appropriate graphical analysis.
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Chapter 10: Worker Mobility: Migration, Immigration, and
Turnover
Q1) Suppose that by moving,one could increase one's income by 20%.Which of these
events will reduce the likelihood a person will move?
A) Wages in the person's profession, nationwide, fall dramatically.
B) The person becomes better educated.
C) Markets for the person's skill become less localized.
D) The person has no children, making a good fit less important.
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Q2) City X has a large fraction of illegal immigrants; its native high school dropouts earn
$17 an [Link] Y has a small fraction of illegal immigrants; its native high school
dropouts earn $18 an [Link] suggests that illegal immigrants have a small effect on
drop-out [Link] of the following,if true and present,would suggest the true
negative effect of illegal immigrants on dropout wages is much larger?
A) Illegal immigrants tend to locate in cities with lots of low-wage jobs.
B) Illegal immigrants and high school dropouts are gross complements.
C) Falling wages induces a capital inflow into a city.
D) A large fraction of illegal immigrants in a city causes native high-school drop outs to
move out of the city and move where there are fewer illegal immigrants.
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Q3) How does the quit rate behave over the business cycle?
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Chapter 9: Investments in Human Capital: Education and
Training
Q1) Suppose an individual expects to receive a payment of $5,000 in 10 [Link] is the
present value of the payment if the discount rate is 8%? What is the present value of the
payment if the discount rate is 4%? What principle is illustrated by this example?
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Q2) Which of the following is NOT an expense of acquiring human capital?
A) purchase of textbooks
B) anxiety caused by final exams
C) any wages foregone to attend school
D) cost of food and housing while attending school
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Q3) The psychic costs of college are usually lowest for
A) students with relatively high ability.
B) students from poor backgrounds.
C) students with average or low ability.
D) students who are at the margin in terms of attending college or not.
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