Within a household, the allocation of labor to household production depends on:
A. Relative marketplace wages.
B. Individual preferences for household versus marketplace work.
C. Relative ability at household production.
D. The household utility function for marketplace versus household goods.
E. All of the above.
Why do workers typically pursue their education while young?
A. Because there is more time to benefit from the higher wages that are typically
associated with more education.
B. Because all of their friends pursue education while young.
C. Because living expenses are low for a younger person.
D. Because parents force their children to attend college immediately after high school.
E. Because they are more likely to receive a scholarship.
Which of the following is true?
A. A person might choose to not move because their family is better off by not moving,
even though the person would individually be better off by moving.
B. A family will move even though as a unit they are better off staying, as long as at
least one member of the family is made better off by moving.
C. When a family migrates, there may be both tied movers and tied stayers in the
family.
D. A repeat mover must have made a mistake in the initial move.
E. Cultural assimilation is not included in migration costs.
How does a profit-maximizing firm that is operating in a competitive labor market
respond to an increase in the wage rate?
A. The firm will demand less capital due to the substitution effect.
B. The firm will demand more labor due to the substitution effect.
C. The firm will produce less output due to the scale effect.
D. The firm will demand more capital due to the scale effect.
E. The firm will demand more labor due to the scale effect.
What is the approximate Gini coefficient associated with the following income
distribution?
A. 0.08
B. 0.13
C. 0.23
D. 0.34
E. 0.48
The reservation wage likely increases when
A. the price of consumption increases.
B. the wage increases.
C. the price level (of consumption and wages) increases.
D. non-labor income increases.
E. one is a discouraged worker.
The standard model of geographic migration suggests:
A. Migration occurs when there is a good chance that a worker will gain back his costs
of moving.
B. Increases in migration costs reduces the gains to migration.
C. Improvements in economic opportunities in the current region of residence
discourage migration.
D. Improvements in economic opportunities in a possible region of residence encourage
migration.
E. All of the above statements are true.
Suppose Amy has 100 efficiency units of labor; Bill has 50 efficiency units of labor;
and Chris has 20 efficiency units of labor. Which of the following is true?
A. A firm will always hire Amy over Chris, regardless of wages.
B. A firm will hire Amy if her wage is at least twice that of Bills and at least five times
that of Chriss.
C. A firm will hire Amy if her wage is at most double that of Bills and at most five
times that of Chriss.
D. A firm will never hire Bill.
E. A firm will never hire Chris.
Suppose the distribution of innate ability is distributed symmetrically throughout a
population but that the wage distribution is positively skewed. What most likely
explains this?
A. A regressive tax code.
B. Decreased immigration.
C. Differences in human capital accumulation.
D. A decreasing Gini coefficient.
E. A non-competitive labor market.
Anna works on a farm every spring during planting season and every fall during the
harvest season. The farm fails to employ Anna during the summer or the winter. What
type of unemployment does Anna experience?
A. Frictional unemployment
B. Seasonal unemployment
C. Cyclical unemployment
D. Structural unemployment
E. Natural unemployment
At a wage of $25 per hour, the firm employs 50,000 hours of labor per week. If the
wage would increase to $27 per hour, the firm would employ 45,000 hours of labor per
week. What is the elasticity of labor demand?
A. -2.50.
B. -1.50.
C. -1.25.
D. -0.50.
E. -0.25.
Which of the following is not a possible explanation as to why wage inequality
increased markedly over the last 40 years in the United States?
A. There was an increase in the supply of low-skill workers, particularly through
immigration.
B. Federal legislation allowed employers to legally engage in more racial
discrimination.
C. Competition from international economies has increased demand for highly
productive workers.
D. Recent technological changes have been complementary to skilled labor (while
substituting for unskilled labor).
E. Institutional changes in the United States such as a steady decline in union coverage
and a falling real minimum wage have led to changes in the wage distribution.
When the government imposes safety regulations on a particular job or labor market,
what is most likely to happen?
A. Wages will increase.
B. Utility will increase if workers are able to correctly evaluate working conditions.
C. Wages will fall but utility will increase if workers misperceive on-the-job risk.
D. Employment will increase.
E. Firms that used to offer bad working conditions will be required to shut down.
Suppose a firm overpays its workers at the start of the job, and then the firm slowly
lowers wages over time until eventually the firm pays the workers considerably less
than the workers marginal product of labor. What prevents this “reverse of a
delayed-compensation scheme” from being implemented?
A. Workers prefer wages to increase over time.
B. The firm would fire the worker as soon as the workers value of marginal product
exceeded the workers wage.
C. Workers would leave the job as soon as the firm tries to pay the worker less than his
or her value of marginal product.
D. The firm would need to enforce a mandatory retirement age which is illegal in the
United States.
E. The workers would never have an incentive to invest in general training.
Principal-agent problems arise when
A. the principal negotiates contracts on behalf of the agent.
B. the agent negotiates contracts on behalf of the principal.
C. the agents objectives are different from the principals objectives.
D. firm owners (the principals) pay employee wages (the agents) based on race.
E. workers (the principals) work harder when the firm owners (the agents) increase
wages.
If the supply of unskilled domestic labor and the supply of unskilled immigrant labor
are both perfectly inelastic, then the typical market equilibrium will be such that:
A. Immigrant labor will replace domestic labor.
B. The perfectly inelastic supply of unskilled domestic labor will prevent the hiring of
any unskilled immigrant labor.
C. The post-immigration equilibrium will be associated with lower wages being paid to
the unskilled immigrants compared to the wages paid to unskilled domestic labor.
D. Wages paid to unskilled domestic labor will be less under immigration than under no
immigration.
E. Labor demand will shift out with increased immigration.
When forming theories, economists must be careful to
A. include all known facts and details.
B. omit crucial factors.
C. mirror the real world as realistically but as simply as possible.
D. consider historical behavior and policies.
E. limit the analysis to two variables.