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53) The two fundamental causes of unemployment at full employment are
A) seasonal jobs and technological change.
B) foreign competition and inancial bankruptcies.
C) job search and job rationing.
D) decreases in labor productivity and more generous retirement beneits.
E) demographic change and decreases in the demand for labor.
Skill: Level 1: Deinition
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
54) In the United States since 1960, the average unemployment rate was highest during
the decade of the
A) 1960s.
B) 1970s.
C) 1980s.
D) 1990s.
E) 2000s.
Skill: Level 1: Deinition
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
55) Job search is deined as
A) the activity of looking for an acceptable, vacant job.
B) saying you are looking for a job when you are actually not looking.
C) attending school to increase your employability.
D) equivalent to job rationing.
E) being paid an eiciency wage.
Skill: Level 1: Deinition
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
61
56) The more generous the amount of unemployment beneits, the
A) higher the opportunity cost of job search.
B) lower the opportunity cost of job search.
C) shorter the time spent searching until accepting a suitable job.
D) shorter the time spent searching for a suitable job and the higher the opportunity cost of
being unemployed.
E) lower the natural unemployment rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
57) The existence of union wages, eiciency wages, and the minimum wage
A) raises the real wage rate above the equilibrium wage rate and creates a shortage of
labor.
B) lowers the real wage rate below the equilibrium wage rate and creates a shortage of
labor.
C) raises the real wage rate above the equilibrium wage rate and raises the natural
unemployment rate.
D) does not have an impact on the equilibrium wage rate or on the amount of
unemployment.
E) raises the real wage rate above the equilibrium wage rate and lowers the natural
unemployment rate.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
58) Job rationing occurs if
A) the minimum wage is set below the equilibrium wage rate.
B) an eiciency wage is set below the equilibrium wage rate.
C) a union wage is set below the equilibrium wage rate.
D) the real wage rate is pushed above the equilibrium wage rate.
E) the Lucas wedge is positive.
Skill: Level 2: Using deinitions
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
62
59) Intel wants to attract the most productive and knowledgeable workers. To achieve this
goal it could pay ________ wage.
A) an eiciency
B) a minimum
C) a nominal
D) an equilibrium
E) a Lucas wedge
Skill: Level 2: Using deinitions
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
60) Collective bargaining by unions can result in a union wage rate that is ________ the
equilibrium real wage rate and creates a ________ of labor.
A) above; surplus
B) above; shortage
C) below; surplus
D) below; shortage
E) equal to; surplus
Skill: Level 1: Deinition
Section: Checkpoint 8.2
Status: Old
AACSB: Relective thinking
63
8.3 Chapter Figures
1) The igure above shows the U.S. production function. How would an increase in capital
be shown in the igure?
A) an upward shift or rotation of the production function
B) a downward shift or rotation of the production function
C) a movement from point A to point B
D) a movement from point C to point B
E) None of the above because the efects of an increase in capital cannot be shown in the
igure.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
64
2) The igure above shows the U.S. production function. How would an increase in
unemployment beneits be shown in the igure?
A) a movement from point C to point B
B) a movement from point A to point B
C) an upward shift or rotation of the production function
D) a downward shift or rotation of the production function
E) None of the above because the efects of an increase in unemployment beneits cannot
be shown in the igure.
Skill: Level 4: Applying models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
3) The igure above shows the U.S. production function. How would an increase in income
taxes be shown in the igure?
A) a movement from point C to point B
B) a movement from point A to point B
C) an upward shift or rotation of the production function
D) a downward shift or rotation of the production function
E) None of the above because the efects of an increase in taxes cannot be shown in the
igure.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
65
4) The igure above shows the U.S. demand for labor curve. If there is a simultaneous
increase in the nominal wage rate of 10 percent and a 10 percent increase in the price
level, there will be a
A) rightward shift of the demand for labor curve.
B) leftward shift of the demand for labor curve.
C) movement downward along the demand for labor curve from a point such as A to a point
such as B.
D) movement upward along the demand for labor curve from a point such as C to a point
such as B.
E) None of the above answers is correct because there is no change in the demand for
labor curve.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
66
5) The igure above shows the U.S. supply of labor curve. If there is a simultaneous
increase in the nominal wage rate of 10 percent and a 10 percent increase in the price
level, there will be a
A) rightward shift of the supply of labor curve.
B) leftward shift of the supply of labor curve.
C) movement downward along the supply of labor curve from a point such as A to a point
such as B.
D) movement upward along the supply of labor curve from a point such as C to a point such
as B.
E) None of the above answers is correct because there is no change in the supply of labor
curve.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
6) The igure above shows the U.S. supply of labor curve. An increase in the income tax rate
leads to a
A) rightward shift of the supply of labor curve.
B) movement upward along the supply of labor curve from a point such as C to a point such
as B.
C) movement downward along the supply of labor curve from a point such as A to a point
such as B.
D) leftward shift of the supply of labor curve.
E) None of the above answers is correct because there is no change in the supply of labor
curve.
Skill: Level 3: Using models
Section: Checkpoint 8.1
67
Status: Old
AACSB: Analytical thinking
68
7) The igure above shows the U.S. supply of labor curve. What was the efect of the decline
in birth rates during the 1960s and 1970s on the supply of labor curve in the 1980s?
A) a rightward shift of the supply of labor curve
B) The supply of labor curve became steeper.
C) a movement downward along the supply of labor curve from a point such as A to a point
such as B
D) a leftward shift of the supply of labor curve
E) None of the above answers is correct because there was no change in the supply of labor
curve.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Status: Old
AACSB: Analytical thinking
8.4 Integrative Questions
1) If the government increases unemployment beneits, then the labor
A) demand curve shifts rightward.
B) demand curve shifts leftward.
C) supply curve shifts rightward.
D) supply curve shifts leftward.
E) Both answers B and D are correct.
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Analytical thinking
2) If the government increases unemployment beneits, then the equilibrium amount of
employment ________ and potential GDP ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Analytical thinking
69
3) If the government raises income taxes, then the labor
A) demand curve shifts rightward.
B) demand curve shifts leftward.
C) supply curve shifts rightward.
D) supply curve shifts leftward.
E) Both answers B and D are correct.
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Analytical thinking
4) If the government raises income taxes, then the equilibrium amount of employment
________ and potential GDP ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Analytical thinking
5) An increase in the time spent on job search
A) decreases potential GDP.
B) decreases the unemployment rate.
C) decreases the labor force participation rate.
D) decreases the demand for labor.
E) decreases the real wage rate.
Skill: Level 3: Using models
Section: Integrative
Status: Old
AACSB: Relective thinking
70
