How does the presence of an underground labor market bias the governments
calculation of the labor force participation rate?
A. The official government statistic on labor force participation is too low, because
people working in the underground labor market should be counted as participating in
the labor market.
B. The official government statistic on labor force participation is too high, because
people working in the underground labor market should be counted as participating in
the labor market.
C. The official government statistic on labor force participation is too low, because
people working in the underground labor market should not be counted as participating
in the labor market.
D. The official government statistic on labor force participation is too high, because
people working in the underground labor market should not be counted as participating
in the labor market.
E. The official government statistic on labor force participation is identical to actual
labor market participation whether or not there is an underground labor market.
Compared to the labor market outcome when there are no payroll taxes, imposing a
payroll tax on labor will typically result in:
A. Firms paying a higher wage.
B. Workers receiving a lower wage net of taxes.
C. A decrease in overall employment.
D. An increase in dead weight loss.
E. All of the above.
Prior to an expanded child care subsidy program in Illinois, the labor force participation
rate of single mothers in Illinois was 45% and in Wisconsin was 48%. After Illinois
expanded its child care subsidy program, the participation rate increased to 58% in
Illinois and to 51% in Wisconsin. The expanded child care program in Illinois is
estimated to increase labor force participation of single mothers by how much
according to a difference-in-differences estimator?
A. 3%
B. 6%
C. 7%
D. 10%
E. 13%
When a worker and firm are matched on the hedonic wage function, it is implied that
A. the worker cannot receive a higher wage at any other firm.
B. the worker-firm match is efficient in the sense that neither the worker nor the firm
could become better off with a different match.
C. the firm could increase its profits by offering a safer job as doing so would allow the
firm to lower the wage it pays.
D. the hedonic wage function must be very steeply sloped to ensure that the worker
doesnt accept a better paying job.
E. the worker receives no surplus from the match.
How does the labor force participation rate of women compare to that of men?
A. The labor force participation rates between the two groups is about the same.
B. Men participate less than women at all ages.
C. Women participate less than men at all ages.
D. Women participate less than men when young (20-34 years-old) but at the same rate
as men in later years (35-54 years-old).
E. Men participate less than women when young (20-34 years-old) but at the same rate
as women in later years (35-54 years-old).
Suppose the age-wage profile of immigrants has been increasing over time. That is, the
age-wage profile of immigrants in the 1990s is higher than the age-wage profile of
immigrants in the 1980s, which is in turn higher than the wage-age profile of
immigrants in the 1970s. In this case, if one uses cohort analysis to estimate the
age-wage profile of immigrants, which of the following is possible to find:
A. A negative return to moving costs.
B. A horizontal age-wage profile.
C. A positively skewed wage distribution.
D. A negatively skewed wage distribution.
E. Negatively selected immigration.
Under a piece rate pay scheme where all workers face different upward-sloped marginal
cost curves for providing effort,
A. all workers will provide the same amount of effort.
B. all workers will produce the same amount of output.
C. all workers will be paid the same amount.
D. workers with higher marginal cost curves for providing effort will produce more
output than workers with lower marginal cost curves.
E. workers with higher marginal cost curves for providing effort will produce less
output than workers with lower marginal cost curves.
A firm owner wants a manager to make difficult personnel decisions when necessary
(which requires firing a worker every now and then) in order to maximize the firms
profits. The manager, however, prefers to not fire anyone. The worker also prefers not
to be fired. In this example, who is the principal and who is the agent?
A. The firm owner is the principal. The manager is the agent.
B. The firm owner is the principal. The should-be-fired worker is the agent.
C. The manager is the principal. The firm owner is the agent.
D. The should-be-fired worker is the principal. The manager is the agent.
E. The should-not-be-fired worker is the principal. The firm owner is the agent.
Variation in wages across individuals is called
A. wage dispersion.
B. the mean wage.
C. the Gini coefficient.
D. the perfect-equality Lorenz curve.
E. the positively-skewed wage distribution.
Featherbedding refers to
A. negotiating better fringe benefits than non-union workers.
B. one union using a previously negotiated contract as a starting point for its own
negotiations.
C. firing high-wage workers when the union goes on strike.
D. the union requiring the firm to hire more workers than are actually needed to
perform a particular task.
E. the union using its members dues to fund political activities.
If the steady-state unemployment rate for an economy is 5%, and each period 2% of
employed workers lose their jobs, what percent of unemployed workers find
employment each period?
A. 8%
B. 18%
C. 28%
D. 38%
E. 48%
When considering the running of a corporation, there is a principal-agent problem
between shareholders and the CEO because
A. shareholders want the firm to maximize the firms share price while the CEO wants
to maximize profits.
B. the CEO is paid in part with stock options.
C. shareholders cannot observe all of the CEOs decisions.
D. shareholders sign confidentiality agreements.
E. shareholders require the firm to pay a dividend.
Which is not a likely explanation as to why unemployment rates are higher in Europe
than in the United States?
A. Most European countries offer more generous unemployment insurance benefits
than in the United States.
B. Most European countries have stronger employment protection restrictions than in
the United States.
C. There is more wage rigidity in Europe than in the United States.
D. Europeans are less productive than Americans.
E. Most European countries offer unemployment benefits for longer than they are
available in the United States.
The elasticity of substitutions is
A. the change in capital over the change in the price of labor.
B. the percentage change in capital over the percentage change in labor.
C. the change in the price of capital over the change in the price of labor.
D. the percentage change in the price of capital over the percentage change in the price
of labor.
E. the percentage change in the capital/labor ratio resulting from a 1 percent change in
the relative price of labor.
Firms usually face asymmetric variable adjustment costs because
A. hiring costs are typically high.
B. firing workers is relatively easy.
C. firing workers can be difficult and costly for legal reasons.
D. workers are reluctant to change jobs during a recession.
E. firms vary in size.
Due to the added worker effect, the labor force participation rate
A. increases during a recession.
B. decreases during a recession.
C. a fairly useless statistic.
D. over-counts the number of workers wanting a job.
E. over-counts the number of workers with a job.
Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour
in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky
ventures enter the labor market. Which of the following is not a likely outcome of this
change?
A. Many firms that currently offer risky jobs will begin offering safe jobs.
B. The fraction of people working safe jobs will decrease.
C. The wage associated with risky jobs will decrease.
D. The number of people working risky jobs will increase.
E. The wage differential will decrease.
From 1965 to 2005, the 90-10 wage gap in the United States has
A. held constant at roughly 100.
B. held constant at roughly 200.
C. held constant at roughly 200 until 1980 and has steadily increased to about 400 since
then.
D. held constant at roughly 200 until 1980 and has steadily decreased to under 100
since then.
E. increased steadily from 200 in 1960 to over 500 in 2000.
Which of the following reasons is not a likely explanation as to why college completion
rates are greater, on average, for whites than for blacks?
A. Tuition costs are lower for whites than blacks.
B. Whites have access to more financial capital to pay for college than blacks.
C. Post-college wages are higher for whites than for blacks.
D. Whites have greater access to higher quality public education at the elementary and
secondary level.
E. Whites are more able to postpone earnings at age 18 than are blacks.