Suppose 40 percent of all potential workers are highly skilled and contribute $50,000 to
the firm each year. The remaining 60 percent of potential workers are less-skilled and
contribute only $30,000 to the firm each year. Schooling costs a highly skilled worker y
per year, while it costs a less-skilled worker 2y per year. What range of y will support a
signaling equilibrium?
A. $0 < y < $50,000
B. $5,000 < y < $10,000
C. $5,000 < y < $20,000
D. $10,000 < y < $20,000
E. $20,000 < y < $50,000
Centerville has 200 unemployed people. Of these 200 people, 35 are unemployed for
two weeks before finding a new job, 55 are unemployed for four weeks before finding a
new job, 30 are unemployed for six weeks before finding a new job, 15 are unemployed
for ten weeks before finding a new job, and 65 are unemployed for fifteen weeks before
finding a new job. Approximately what is the average spell of unemployment in
Centerville?
A. 2 weeks
B. 5 weeks
C. 8 weeks
D. 11 weeks
E. 14 weeks
From 1981 to 1989, the nominal federal minimum wage was unchanged. As a result:
A. The real minimum wage increased because firms paid higher wages to attract
workers over time.
B. The real minimum wage decreased because firms substituted skilled labor for
unskilled labor.
C. The real minimum wage increased due to higher payroll taxes.
D. The real minimum wage decreased over time due to inflation.
E. The real minimum wage was unchanged as well.
A firm has the choice of offering “dirty” jobs that are likely to cause severe health
problems for its workers or of offering “clean” jobs by installing safety equipment at a
cost of $5 per hour per employee that will substantially reduce the chances of health
problems. The firm will
A. install the safety equipment if workers can ascertain whether they are working a
dirty or a clean job.
B. install the safety equipment if workers are willing to be paid $3 per hour less in a
clean job than in a dirty job.
C. never willingly choose to install the costly safety equipment.
D. never install the safety equipment without a government subsidy to do so.
E. willingly install the safety equipment if workers are willing to be paid $7 per hour
less in a clean job than in a dirty job.
When the government imposes a payroll tax on employers (and not on workers), which
of the following effects will not come about?
A. The labor demand curve shifts down.
B. Employment falls.
C. Firms and workers typically both bear a portion of the tax.
D. Real wages will remain fixed if the labor market is competitive.
E. The costs of hiring increase.
Adjustment costs are those costs
A. incurred by a firm as it transports its product from the factory to the marketplace.
B. incurred by a firm when it pays its workers overtime.
C. incurred by a firm as it changes the size of its workforce.
D. saved by a firm as it takes advantage of tax credits offered by the government.
E. saved by the firm when it fires a worker.
The marginal rate of technical substitution at any particular labor-capital bundle is
A. the slope of the isoquant.
B. the average product of labor relative to the average product of capital.
C. the wage relative to the cost of capital.
D. the slope of the indifference curve.
E. the ratio of labor to capital.
Which of the following is not likely to help a firm motivate its workers to put forth
more effort?
A. Providing a free or subsidized company gym and/or cafeteria.
B. Installing monitoring equipment.
C. Providing competitive year-end bonuses.
D. Implementing a profit-sharing scheme.
E. All of the above are likely to motivate workers to put forth more effort.
In the standard Becker model of discrimination, each firm is associated with a
discrimination coefficient of d > 0 and acts as if the wage paid to blacks is wB(1+d)
where wB is the actual hourly wage paid to blacks. In equilibrium, a threshold level of
d, labeled d*, comes about that sorts firms based on hiring decisions. Which of the
following is not an outcome of this model?
A. All firms with d d* will employ all blacks or all whites.
B. Profits fall as d increases as long as d < d*.
C. In the long run, discrimination will be competed away in a competitive labor market.
D. All discriminating firms hire only white workers.
E. All firms with d > d* earn the same amount of profit.
What is the budget line for consumption (C) and leisure (L) if a person faces a constant
wage of $10 per hour, there are 168 hours in the week to work, and she receives
non-labor income of $220 per week?
A. C = 1,900
B. C + 10L = 1,900
C. L = 10C + 220
D. C – 10L = 1,460
E. 10C – L = 1,460
Temporary layoffs are common in the United States especially among workers who are
heavily invested with specific training. Why?
A. Specific training deteriorates quickly, so a laid-off worker with specific training is
not valuable to any firm.
B. The laid-off worker with specific training is more valuable to the firm that laid her
off than she is to any other firm. Thus, it is in the workers best interest to remain
unemployed until recalled to work at her original firm.
C. Workers without specific training are never hired in the first place.
D. Workers with specific training know they dont need to work hard when employed.
E. Unemployment benefits are tied to specific training.
If unskilled domestic labor and unskilled immigrant labor are substitutes in the
production process, then a more open immigration policy will likely result in all but
which of the following?
A. The total market supply of unskilled labor shifts out.
B. The market-clearing wage for unskilled labor decreases.
C. Total employment of unskilled labor increases.
D. The wage received by unskilled native workers decreases.
E. The demand curve for unskilled labor shifts up (out).
In the standard model of a monopoly union bargaining with the firm, it is typically
assumed that
A. the unions sole objective is to increase the wage.
B. union leadership disregards the preferences of the rank and file.
C. unions never lead to an efficiency loss.
D. unions are willing to tradeoff some amount of higher earnings for greater
employment.
E. unions and management secretly negotiate on the behalf of stockholders.
Which of the following would result in a short-run increase in the wage rate in a
competitive labor market?
A. An increase in immigration.
B. An increase in the output price.
C. A decrease in productivity.
D. An increase in native labor supply.
E. A decrease in labor demand.
Consider the following hypothetical difference-in-differences results concerning the
average of hours worked in “big-box stores” between North and South Dakota before
and after North Dakota increased its minimum wage.
The minimum wage
increase is associated with average hours of working decreasing by how much per week
in North Dakota relative to South Dakota?
A. 2.1 hours
B. 11.7 hours
C. 13.8 hours
D. 15.9 hours
E. 20.2 hours
The market for economists in Greenland has recently experienced an increase in the
number of economists employed and an increase in the wage of economists. What could
explain such a change?
A. The demand for economists recently increased while the supply of economists
remained unchanged.
B. The demand for economists recently decreased while the supply of economists
remained unchanged.
C. The demand for economists remained unchanged while the supply of economists
increased.
D. The demand for economists remained unchanged while the supply of economists
decreased.
E. The demand for economists recently decreased while the supply of economists
recently increased.
Which of the following is not likely to prevent some people from migrating?
A. Some people face high financial costs associated with migrating.
B. Some people dont want to leave their family and friends.
C. Having a spouse who has a very well-paying job in the current location.
D. Having a lucrative job offer in a different city.
E. Having a teenage child who does not want to change high schools.