Question 1

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 2

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 3

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 cent 
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 cent

Question 4

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 5

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 6

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 7

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 above 
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 above

Question 8

Sectoral shifts in the economy:

Accepted Answer

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

Question 9

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

Question 10

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 laws 
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 laws

Question 11

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 equally 
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 equally

Question 12

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

Accepted Answer

With efficiency wages, workers

Question 13

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 force 
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 force

Question 14

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 15

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 16

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 17

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

Accepted Answer

With constant job creation and

Question 18

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

Accepted Answer

In an employment relationship, the firm

Question 19

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 above 
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 above

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

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

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

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

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.

Wages at a rate greater than the minimum level can:

Sectoral shifts in the economy:

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

The unemployment rate is never zero because:

Which of the following statements is correct about minimum wages?

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

The labour-force participation rate:

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

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

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

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

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

Which of the following is the correct statement?

Explain when minimum laws are binding and result in unemployment.

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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