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SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1. The unemployment rate is measured starting with a survey of about 60,000
2. An increase in the world price of oil increases the amount of frictional
3. Figure 1 shows the supply curve (S) and the demand curve (D) for labor. The
wage (W) is above the equilibrium wage (WE). The result is unemployment, equal
to the amount by which the quantity of labor supplied (LS) exceeds the quantity of
labor demanded (LD).
Figure 1
4. A union in the auto industry raises the wages of workers employed by General
5. There are four reasons that %rms might %nd it pro%table to pay wages above the
Chapter Quick Quiz
Questions for Review
1. The BLS categorizes each adult (16 years of age and older) as employed,
unemployed, or not in the labor force. The labor force consists of the sum of the
2. Unemployment is typically short term. Most people who become unemployed are
3. Frictional unemployment is inevitable because the economy is always changing.
4. Minimum-wage laws are a better explanation for unemployment among
5. Unions a*ect the natural rate of unemployment via the e*ect on insiders and
6. Advocates of unions claim that unions are good for the economy because they are
7. Four reasons why a %rm's pro%ts might increase when it raises wages are: (1)
Problems and Applications
1. a. The adult population consisted of the number of employed (140,196,000) plus
2 a. When Jon %nds a job after a long search, the unemployment rate decreases
b When Tyrion graduates and is immediately employed, the unemployment rate
c When Arya gives up looking for a job, the unemployment rate decreases
d When Daenerys quits her job to be a stay-at-home mom, the unemployment
e When Sansa becomes an adult but does not look for work, there is no e*ect
f When Jaime becomes an adult and begins looking for work, the
g When Cersei dies while enjoying retirement, there is no e*ect on the
h When Jorah dies working long hours at the o>ce, the unemployment rate
3. Many answers are possible.
4. The fact that employment increased 12.1 million while unemployment declined
7.3 million is consistent with growth in the labor force of 4.8 million workers. The
5. a. If an auto company goes bankrupt and its workers immediately begin looking
b. If some of the unemployed auto workers give up looking for a job, the
c. If numerous students graduate from college and cannot %nd work, the
d. If numerous students graduate from college and immediately begin new jobs,
the unemployment rate will fall and the employment-population ratio will rise.
6. a. A construction worker who is laid o* because of bad weather is likely to
b. A manufacturing worker who loses his job at a plant in an isolated area is
c. A worker in the stagecoach industry who was laid o* because of the growth of
d. A short-order cook who loses his job when a new restaurant opens is likely to
e. An expert welder with little education who loses his job when the company
Figure 2
7. Figure 2 shows a diagram of the labor market with a binding minimum wage. At
8. a. Figure 3 illustrates the e*ects of a union being established in the
b. When those workers who become unemployed in the manufacturing sector
LS,1 LS,2
LD,
1
LD,
2
wM,2
wM,1
Quantit
y
of
Labor
Wage
Demand
Supply
Figure 3
9. a. Wages between the two industries would be equal. If not, new workers would
choose the industry with the higher wage, pushing the wage in that industry
down.
10. a. If a %rm was not providing such bene%ts prior to the legislation, the curve
L2
L1
w2
w1
wU
wNU
Service Labor
Market
Manufacturin
g Labor
Market
DD
S2
S1
S
LNU LUS
LUD Quantit
y
of
Labor
Quantit
y
of
Labor
Wage
Wage
Figure 4
c. Figure 4 shows the equilibrium in the labor market. Because the demand and
Figure 5
S2
S1
D2
D1
w1-$4
wm = w1-$3
w1
LD,2 LS,2
L1
Wage
Quantit
y
of
Labor
Figure 6
e. If the workers do not value the mandated bene%t at all, the supply curve of
labor does not shift. As a result, the wage rate will decline by less than $4 and
