Question 1

Suppose there are 10 million in the labour force, and 600 000 unemployed people.During the next month, 20 000 people lose their jobs and 30 000 find jobs.The new total of employed persons is __________ and the new unemployment rate is ___________.(Assume there are no new entrants into the labour force.)

Accepted Answer

A)  10.1 million; 5.8 per cent
B)  10 million; 6.1 per cent
C)  9.41 million; 5.9 per cent
D)  9.39 million; 6.1 per centE) A) and C)
F) A) and B)

Question 2

Suppose that a firm is faced with an excess supply of workers.What would the firm do? Explain with standard economic theory and with efficiency wage theory.

Accepted Answer

a.Standard economic theory: assuming a f...

Question 3

If workers are paid efficiency wages, why is there unemployment?

Accepted Answer

With efficiency wages, workers...

Question 4

Wages at a rate greater than the minimum level can:

Accepted Answer

A)  create productivity gains if managed correctly
B)  encourage higher quality candidates to apply for positions
C)  encourage a labour surplus
D)  all of the aboveE) B) and D)
F) B) and C)

Question 5

Discuss the 'unionisation' debate.What are the positive and negative effects when a union raises the wage above the equilibrium level?

Accepted Answer

Critics argue that unions are merely a t...

Question 6

Surplus labour in the market creates pressure to increase market wages, in the absence of minimum-wage legislation.

Accepted Answer

A) True 
 B)False

Question 7

Identify the principal, the agent and the moral hazard inherent in each of the following situations.
a.In order to reduce personal injury claims, insurance companies successfully lobby legislators to pass laws requiring the use of seatbelts in automobiles.
b.A university provides free employee health insurance, which reduces the direct cost to the faculty and staff of visiting the doctor and the dentist.

Accepted Answer

a.The principal is the insurance company...

Question 8

If the minimum wage is set above the equilibrium wage level, then less people could be hired compared with the equilibrium level.

Accepted Answer

A) True 
 B)False

Question 9

Sectoral shifts in the economy:

Accepted Answer

A)  decrease job search
B)  increase productivity
C)  temporarily cause unemployment
D)  do all of the aboveE) A) and C)
F) B) and C)

Question 10

Which of the following statements is correct about minimum wages?

Accepted Answer

A)  Minimum wages are a predominant cause of unemployment in the economy
B)  Minimum wages do not cause unemployment
C)  Minimum wages have an important effect on certain groups with particularly high unemployment rates
D)  Minimum wages are binding in every labour market equallyE) C) and D)
F) All of the above

Question 11

In each of the following situations, explain why there is asymmetric information, and identify the problem of adverse selection.
a.The sale of life insurance
b.The sale of used computers

Accepted Answer

a.Individuals know more about the risks ...

Question 12

Economists and policymakers should focus on solving problems of short-term unemployment, since long-term unemployment will be resolved eventually.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the correct statement?

Accepted Answer

A)  There is no easy way for policymakers to reduce the economy's natural rate of unemployment, but it is easy to alleviate the hardships of the unemployed
B)  There is no easy way for policymakers to reduce the economy's natural rate of unemployment and at the same time alleviate the hardships of the unemployed
C)  There is no easy way for policymakers to alleviate the hardships experienced by the unemployed, but it is easy to reduce the economy's natural rate of unemployment
D)  None of the aboveE) B) and D)
F) None of the above

Question 14

According to the job search explanation, why is there unemployment?

Accepted Answer

With constant job creation and...

Question 15

Explain the worker-effort variant of efficiency wage theory with moral hazard.

Accepted Answer

In an employment relationship, the firm ...

Question 16

The labour-force participation rate:

Accepted Answer

A)  equals one minus the unemployment rate
B)  measures the percentage of the total adult population in the labour force
C)  measures the percentage of the number of employed in the labour force
D)  equals one minus the labour forceE) A) and B)
F) C) and D)

Question 17

The unemployment rate is never zero because:

Accepted Answer

A)  some wages are always above the market equilibrium level
B)  there will always be some people who choose not to work
C)  of the presence of discouraged workers
D)  of maximum wage lawsE) A) and B)
F) None of the above

Question 18

The natural rate of unemployment is the rate of unemployment when the economy is in:

Accepted Answer

A)  a recession
B)  an expansion
C)  neither a recession nor an expansion
D)  either a recession or an expansionE) A) and D)
F) A) and C)

Question 19

According to the theory of efficiency wages, firms operate less efficiently if wages are above the equilibrium level.

Accepted Answer

A) True 
 B)False

Question 20

Explain when minimum laws are binding and result in unemployment.

Accepted Answer

When the minimum wage is set a...

Exam 28: The Natural Rate of Unemployment

Surplus labour in the market creates pressure to increase market wages, in the absence of minimum-wage legislation.

Correct Answer
verified

If workers are paid efficiency wages, why is there unemployment?

Correct Answer
verified
With efficiency wages, workers...
View Answer

Explain the worker-effort variant of efficiency wage theory with moral hazard.

Correct Answer
verified
In an employment relationship, the firm ...
View Answer

Wages at a rate greater than the minimum level can:

Correct Answer
verified

Which of the following statements is correct about minimum wages?

Correct Answer
verified

Sectoral shifts in the economy:

Correct Answer
verified

Which of the following is the correct statement?

Correct Answer
verified

The unemployment rate is never zero because:

Correct Answer
verified

Correct Answer
verified
a.The principal is the insurance company...
View Answer

Suppose there are 10 million in the labour force, and 600 000 unemployed people.During the next month, 20 000 people lose their jobs and 30 000 find jobs.The new total of employed persons is and the new unemployment rate is _.(Assume there are no new entrants into the labour force.)

Correct Answer
verified

According to the theory of efficiency wages, firms operate less efficiently if wages are above the equilibrium level.

Correct Answer
verified

The labour-force participation rate:

Correct Answer
verified

The natural rate of unemployment is the rate of unemployment when the economy is in:

Correct Answer
verified

Economists and policymakers should focus on solving problems of short-term unemployment, since long-term unemployment will be resolved eventually.

Correct Answer
verified

If the minimum wage is set above the equilibrium wage level, then less people could be hired compared with the equilibrium level.

Correct Answer
verified

Discuss the 'unionisation' debate.What are the positive and negative effects when a union raises the wage above the equilibrium level?

Correct Answer
verified
Critics argue that unions are merely a t...
View Answer

Explain when minimum laws are binding and result in unemployment.

Correct Answer
verified
When the minimum wage is set a...
View Answer

According to the job search explanation, why is there unemployment?

Correct Answer
verified
With constant job creation and...
View Answer

Suppose that a firm is faced with an excess supply of workers.What would the firm do? Explain with standard economic theory and with efficiency wage theory.

Correct Answer
verified
a.Standard economic theory: assuming a f...
View Answer

In each of the following situations, explain why there is asymmetric information, and identify the problem of adverse selection. a.The sale of life insurance b.The sale of used computers

Correct Answer
verified
a.Individuals know more about the risks ...
View Answer

Exam 28: The Natural Rate of Unemployment

Surplus labour in the market creates pressure to increase market wages, in the absence of minimum-wage legislation.

Correct AnswerverifiedShow Answer

If workers are paid efficiency wages, why is there unemployment?

Correct AnswerverifiedWith efficiency wages, workers...View AnswerShow Answer

Explain the worker-effort variant of efficiency wage theory with moral hazard.

Correct AnswerverifiedIn an employment relationship, the firm ...View AnswerShow Answer

Wages at a rate greater than the minimum level can:

Correct AnswerverifiedShow Answer

Which of the following statements is correct about minimum wages?

Correct AnswerverifiedShow Answer

Sectoral shifts in the economy:

Correct AnswerverifiedShow Answer

Which of the following is the correct statement?

Correct AnswerverifiedShow Answer

The unemployment rate is never zero because:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The principal is the insurance company...View AnswerShow Answer

Correct AnswerverifiedShow Answer

According to the theory of efficiency wages, firms operate less efficiently if wages are above the equilibrium level.

Correct AnswerverifiedShow Answer

The labour-force participation rate:

Correct AnswerverifiedShow Answer

The natural rate of unemployment is the rate of unemployment when the economy is in:

Correct AnswerverifiedShow Answer

Economists and policymakers should focus on solving problems of short-term unemployment, since long-term unemployment will be resolved eventually.

Correct AnswerverifiedShow Answer

If the minimum wage is set above the equilibrium wage level, then less people could be hired compared with the equilibrium level.

Correct AnswerverifiedShow Answer

Discuss the 'unionisation' debate.What are the positive and negative effects when a union raises the wage above the equilibrium level?

Correct AnswerverifiedCritics argue that unions are merely a t...View AnswerShow Answer

Explain when minimum laws are binding and result in unemployment.

Correct AnswerverifiedWhen the minimum wage is set a...View AnswerShow Answer

According to the job search explanation, why is there unemployment?

Correct AnswerverifiedWith constant job creation and...View AnswerShow Answer

Suppose that a firm is faced with an excess supply of workers.What would the firm do? Explain with standard economic theory and with efficiency wage theory.

Correct Answerverifieda.Standard economic theory: assuming a f...View AnswerShow Answer

In each of the following situations, explain why there is asymmetric information, and identify the problem of adverse selection. a.The sale of life insurance b.The sale of used computers

Correct Answerverifieda.Individuals know more about the risks ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
With efficiency wages, workers...
View Answer

Correct Answer
verified
In an employment relationship, the firm ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.The principal is the insurance company...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Critics argue that unions are merely a t...
View Answer

Correct Answer
verified
When the minimum wage is set a...
View Answer

Correct Answer
verified
With constant job creation and...
View Answer

Correct Answer
verified
a.Standard economic theory: assuming a f...
View Answer

Correct Answer
verified
a.Individuals know more about the risks ...
View Answer