A couple is considering moving to Tampa from Chicago. The cost of moving for Crystal
is $300 while the cost of moving for Amelia is $600. Crystal earns $500 in Chicago and
$550 in Tampa. Amelia earns $200 in Chicago and $1000 in Tampa. Will they move as
a couple?
A. Yes, because they would earn $1,550 in Tampa but only $700 in Chicago.
B. Yes, because they receive a net gain of $150 by moving to Tampa.
C. Yes, because the joint cost of moving ($900) exceed what they could earn in Chicago
($700).
D. No, because they would lose $50 by moving to Tampa when all benefits and costs
are taken into account.
E. No, because neither person would choose to move to Tampa on their own.
Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor
force. Of these, 240,000 are employed and 60,000 are unemployed. What is the
unemployment rate?
A. 10%
B. 20%
C. 25%
D. 35%
E. 40%
What is the added worker effect?
A. A secondary worker enters the labor force when the wage rate is high.
B. A secondary worker enters the labor force when his or her consumption of goods
exceeds his or her non-labor income.
C. A secondary worker enters the labor force when his or her household productivity
decreases.
D. A secondary worker enters the labor force when he or she no longer must allocate
time to household production.
E. A secondary worker enters the labor force when the main worker in the household
has lost his or her job or has experienced a wage cut.
In a basic model of wage and employment determination with a monopoly union, the
monopoly union stipulates the wage. The firm then responds by choosing an
employment level that
A. maximizes profit.
B. minimizes labor costs.
C. minimizes the wage.
D. maximizes strike duration.
E. maximizes output.
What is not true when thinking of the firms objective as a cost-minimization problem
rather than as a profit-maximization problem?
A. The slope at any point on any isoquant reveals the marginal rate of technical
substitution.
B. The firm chooses labor and capital to minimize its costs.
C. The firm chooses a particular level of output to produce.
D. The price of the output good never enters the decision as to how much labor or
capital to employ.
E. The firm will choose labor and capital inputs so that the marginal productivity of
labor relative to the marginal productivity of capital equals the price of labor relative to
the price of capital.
A standard efficiency wage model pays workers higher wages in order to increase
worker efficiency. As a result, firm profits increase and there is a pool of involuntarily
unemployed workers. In this model, if the firms cost of monitoring effort falls,
A. the efficiency wage will fall.
B. the number of shirking workers will fall.
C. firm profits will fall.
D. the firm will increase its number of factory managers.
E. the pool of involuntarily unemployed workers will increase.
Which of the following is a normative (rather than a positive) statement?
A. The (nominal) minimum wage is $7.25 per hour.
B. Public education should be funded primarily at the state level.
C. The federal debt exceeds $8 trillion.
D. At its peak, unemployment exceeded 10% during the 2007 recession.
E. The average wage of high-school dropouts has fallen by 20% since 1970.
What is likely to happen to the labor market equilibrium for firemen as building codes
change to require firewalls and sprinklers to be included in all new construction?
A. The number of firemen employed will increase while firemen wages will decrease.
B. The number of firemen employed will decrease while firemen wages will decrease.
C. The number of firemen employed will increase while firemen wages will increase.
D. The number of firemen employed will decrease while firemen wages will increase.
E. The number of firemen employed will remain the same while firemen wages will
increase.
Which of the following is a sign of a well-functioning labor market?
A. A high degree of labor mobility (job losses and job gains).
B. A constant unemployment rate.
C. Equal pay for all workers.
D. Equal pay in all regions.
E. All workers have a college education.
A hedonic wage function could be applied to which of the following job characteristics?
A. The probability of being injured on the job.
B. The degree to which a job involves monotonous work.
C. The degree to which the area surrounding the job location is safe.
D. The degree to which a job involves strenuous work.
E. All of the above can be represented with a hedonic wage function.