Question 1

Why might it be wrong to include self-proclaimed discouraged workers in calculations of the unemployment rate?

Accepted Answer

A)  Discouraged workers likely have a job but are discouraged only because they would like a better-paying job. 
B)  Some discouraged workers are taking advantage of a low-wage period to consume large amounts of leisure. 
C)  Discouraged workers receive federal assistance. 
D)  Discouraged workers are already included in official unemployment statistics as long as no one else in their household is working. 
E)  By definition, discouraged workers are only temporarily laid-off, and they will return to a job shortly. 
A)  Discouraged workers likely have a job but are discouraged only because they would like a better-paying job. 
B)  Some discouraged workers are taking advantage of a low-wage period to consume large amounts of leisure. 
C)  Discouraged workers receive federal assistance. 
D)  Discouraged workers are already included in official unemployment statistics as long as no one else in their household is working. 
E)  By definition, discouraged workers are only temporarily laid-off, and they will return to a job shortly.

Question 2

What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives nonlabor income of $220 per week?

Accepted Answer

A)  C = 1340 
B)  C + 10L = 1340 
C)  L = 10C + 220 
D)  C − 10L = 900 
E)  10C − L = 900 
A)  C = 1340 
B)  C + 10L = 1340 
C)  L = 10C + 220 
D)  C − 10L = 900 
E)  10C − L = 900

Question 3

An increase in nonlabor income while holding the wage rate constant

Accepted Answer

A)  rotates the budget line out along the consumption axis. 
B)  rotates the budget line out along the leisure axis. 
C)  rotates the budget line in along the leisure axis. 
D)  rotates the budget line in along the consumption axis. 
E)  shifts the budget line up while maintaining the same slope. 
A)  rotates the budget line out along the consumption axis. 
B)  rotates the budget line out along the leisure axis. 
C)  rotates the budget line in along the leisure axis. 
D)  rotates the budget line in along the consumption axis. 
E)  shifts the budget line up while maintaining the same slope.

Question 4

Due to the discouraged worker effect, the labor force participation rate

Accepted Answer

A)  increases during a recession. 
B)  decreases during a recession. 
C)  does not change when the unemployment rate increases. 
D)  overcounts the number of workers wanting a job. 
E)  overcounts the number of workers with a job. 
A)  increases during a recession. 
B)  decreases during a recession. 
C)  does not change when the unemployment rate increases. 
D)  overcounts the number of workers wanting a job. 
E)  overcounts the number of workers with a job.

Question 5

The consensus estimate of the elasticity of labor supply among females is −0.1. The interpretation of this estimate is what?

Accepted Answer

A)  On average, women will increase hours of work by 10% when their wage increases by 1%. 
B)  On average, women will increase hours of work by 1% when their wage increases by 10%. 
C)  On average, women will reduce hours of work by 5% when their wage increases by 10%. 
D)  On average, women will reduce hours of work by 10% when their wage increases by 1%. 
E)  On average, women will reduce hours of work by 1% when their wage increases by 10%. 
A)  On average, women will increase hours of work by 10% when their wage increases by 1%. 
B)  On average, women will increase hours of work by 1% when their wage increases by 10%. 
C)  On average, women will reduce hours of work by 5% when their wage increases by 10%. 
D)  On average, women will reduce hours of work by 10% when their wage increases by 1%. 
E)  On average, women will reduce hours of work by 1% when their wage increases by 10%.

Question 6

Which one of the following conclusions is not supported by the intertemporal substitution hypothesis?

Accepted Answer

A)  The profile of hours of work over the life cycle will have roughly the same shape as the age-earnings profile. 
B)  Hours of work over the life cycle will be inversely related to wages over the life cycle. 
C)  Hours of work increase as the wage rises and decline as the wage falls. 
D)  An unemployed person might choose to become a discouraged worker during a low-wage recession with an eye toward returning to the labor market when wages increase. 
E)  A high wage worker may choose to work 60+ hours a week during her peak wage years in order to retire at a younger age later in life. 
A)  The profile of hours of work over the life cycle will have roughly the same shape as the age-earnings profile. 
B)  Hours of work over the life cycle will be inversely related to wages over the life cycle. 
C)  Hours of work increase as the wage rises and decline as the wage falls. 
D)  An unemployed person might choose to become a discouraged worker during a low-wage recession with an eye toward returning to the labor market when wages increase. 
E)  A high wage worker may choose to work 60+ hours a week during her peak wage years in order to retire at a younger age later in life.

Question 7

How does the labor force participation rate of women compare to that of men in the United States?

Accepted Answer

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). 
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).

Question 8

According to the substitution effect, in response to an increase in her wage, a person will

Accepted Answer

A)  reduce hours worked because she wants to substitute leisure for work. 
B)  reduce hours worked because she wants to substitute work for leisure. 
C)  increase hours worked because leisure has become relatively more expensive than consumption. 
D)  increase hours worked because leisure has become relatively less expensive than consumption. 
E)  increase both consumption and hours of leisure. 
A)  reduce hours worked because she wants to substitute leisure for work. 
B)  reduce hours worked because she wants to substitute work for leisure. 
C)  increase hours worked because leisure has become relatively more expensive than consumption. 
D)  increase hours worked because leisure has become relatively less expensive than consumption. 
E)  increase both consumption and hours of leisure.

Question 9

Assuming consumption and leisure are both normal goods, hours worked will fall when the wage increases if

Accepted Answer

A)  the income effect dominates the substitution effect. 
B)  the substitution effect dominates the income effect. 
C)  if the income and substitution effect move in the same direction (i.e., if they are of the same sign). 
D)  if the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign). 
E)  the wage increase is accompanied by an increase in prices. 
A)  the income effect dominates the substitution effect. 
B)  the substitution effect dominates the income effect. 
C)  if the income and substitution effect move in the same direction (i.e., if they are of the same sign). 
D)  if the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign). 
E)  the wage increase is accompanied by an increase in prices.

Question 10

How does the presence of an underground labor market bias the government's calculation of the labor force participation rate?

Accepted Answer

A)  The official government statistic on labor force participation is too low because people working in the underground labor market should be counted as being in the labor market and employed. 
B)  The official government statistic on labor force participation is too high because people working in the underground labor market should be counted as being in the labor market but unemployed. 
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 being 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 being 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. 
A)  The official government statistic on labor force participation is too low because people working in the underground labor market should be counted as being in the labor market and employed. 
B)  The official government statistic on labor force participation is too high because people working in the underground labor market should be counted as being in the labor market but unemployed. 
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 being 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 being 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.

Why might it be wrong to include self-proclaimed discouraged workers in calculations of the unemployment rate?

What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives nonlabor income of $220 per week?

An increase in nonlabor income while holding the wage rate constant

Due to the discouraged worker effect, the labor force participation rate

The consensus estimate of the elasticity of labor supply among females is −0.1. The interpretation of this estimate is what?

Which one of the following conclusions is not supported by the intertemporal substitution hypothesis?

How does the labor force participation rate of women compare to that of men in the United States?

According to the substitution effect, in response to an increase in her wage, a person will

Assuming consumption and leisure are both normal goods, hours worked will fall when the wage increases if

How does the presence of an underground labor market bias the government's calculation of the labor force participation rate?

Introduction to Labor Economics

Labor Demand

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters

Exam 2: Labor Supply

Why might it be wrong to include self-proclaimed discouraged workers in calculations of the unemployment rate?

What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives nonlabor income of $220 per week?

An increase in nonlabor income while holding the wage rate constant

Due to the discouraged worker effect, the labor force participation rate

The consensus estimate of the elasticity of labor supply among females is −0.1. The interpretation of this estimate is what?

Which one of the following conclusions is not supported by the intertemporal substitution hypothesis?

How does the labor force participation rate of women compare to that of men in the United States?

According to the substitution effect, in response to an increase in her wage, a person will

Assuming consumption and leisure are both normal goods, hours worked will fall when the wage increases if

How does the presence of an underground labor market bias the government's calculation of the labor force participation rate?

Introduction to Labor Economics

Labor Demand

Labor Market Equilibrium

Compensating Wage Differentials

Human Capital

The Wage Structure

Labor Mobility

Labor Market Discrimination

Labor Unions

Incentive Pay

Unemployment

Filters