Question 1

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%. E

Question 2

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

Accepted Answer

A) increases during a recession. 
B) decreases during a recession. 
C) is counter-cyclical. 
D) over-counts the number of workers wanting a job. 
E) over-counts the number of workers with a job. 
A) increases during a recession. 
B) decreases during a recession. 
C) is counter-cyclical. 
D) over-counts the number of workers wanting a job. 
E) over-counts the number of workers with a job. B

Question 3

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

Accepted Answer

A) increases during a recession. 
B) decreases during a recession. 
C) a fairly useless statistic. 
D) over-counts the number of workers wanting a job. 
E) over-counts the number of workers with a job. 
A) increases during a recession. 
B) decreases during a recession. 
C) a fairly useless statistic. 
D) over-counts the number of workers wanting a job. 
E) over-counts the number of workers with a job. A

Question 4

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?

Accepted Answer

A) 10% 
B) 20% 
C) 25% 
D) 35% 
E) 40% 
A) 10% 
B) 20% 
C) 25% 
D) 35% 
E) 40%

Question 5

Prior to an expanded child care subsidy program in Illinois, the labor force participation rate of single mothers in Illinois was 45% and in Wisconsin was 48%. After Illinois expanded its child care subsidy program, the participation rate increased to 58% in Illinois and to 51% in Wisconsin. The expanded child care program in Illinois is estimated to increase labor force participation of single mothers by how much according to a difference-in-differences estimator?

Accepted Answer

A) 3% 
B) 6% 
C) 7% 
D) 10% 
E) 13% 
A) 3% 
B) 6% 
C) 7% 
D) 10% 
E) 13%

Question 6

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 labor force participation rate?

Accepted Answer

A) 25% 
B) 48% 
C) 55% 
D) 60% 
E) 80% 
A) 25% 
B) 48% 
C) 55% 
D) 60% 
E) 80%

Question 7

Which of the following best describes the historical pattern in the average number of hours worked per week in the United States when the large drop during the Great Depression is ignored?

Accepted Answer

A) Average hours decreased from 60 hours per week in 1900 to 40 hours per week in 1960, with average hours holding steady since 1960. 
B) Average hours have been consistently between 35 and 40 hours from 1900 through 2010. 
C) Average hours increased from 25 hours per week on average in 1900 to over 40 hours per week in 2010. 
D) Average hours constantly fell from about 55 hours per week in 1900 to about 33 hours per week in 2010. 
E) Average hours held constant at 50 hours per week from 1900 through 1960; since 1960 average hours have consistently fallen to just under 30 hours per week in 2010. 
A) Average hours decreased from 60 hours per week in 1900 to 40 hours per week in 1960, with average hours holding steady since 1960. 
B) Average hours have been consistently between 35 and 40 hours from 1900 through 2010. 
C) Average hours increased from 25 hours per week on average in 1900 to over 40 hours per week in 2010. 
D) Average hours constantly fell from about 55 hours per week in 1900 to about 33 hours per week in 2010. 
E) Average hours held constant at 50 hours per week from 1900 through 1960; since 1960 average hours have consistently fallen to just under 30 hours per week in 2010.

Question 8

What is the discouraged worker effect?

Accepted Answer

A) A discouraged worker will accept any job offer regardless of the wage. 
B) Because a discouraged worker accepts a part-time job when he wants a full-time job, he is considered to still be unemployed. 
C) A discouraged worker accepts a part-time job, and is therefore counted as being employed. 
D) A discouraged worker stops looking for a job, but is still counted as being in the labor force. 
E) A discouraged worker stops looking for a job, and therefore is no longer counted as being in the labor force. 
A) A discouraged worker will accept any job offer regardless of the wage. 
B) Because a discouraged worker accepts a part-time job when he wants a full-time job, he is considered to still be unemployed. 
C) A discouraged worker accepts a part-time job, and is therefore counted as being employed. 
D) A discouraged worker stops looking for a job, but is still counted as being in the labor force. 
E) A discouraged worker stops looking for a job, and therefore is no longer counted as being in the labor force.

Question 9

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 10

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 non-labor income of $220 per week?

Accepted Answer

A) C = 1,340 
B) C + 10L = 1,340 
C) L = 10C + 220 
D) C - 10L = 900 
E) 10C - L = 900 
A) C = 1,340 
B) C + 10L = 1,340 
C) L = 10C + 220 
D) C - 10L = 900 
E) 10C - L = 900

Question 11

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 12

What is the added worker effect?

Accepted Answer

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. 
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.

Question 13

Assuming consumption and leisure are 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) the income and substitution effect move in the same direction (i.e., if they are of the same sign). 
D) 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) the income and substitution effect move in the same direction (i.e., if they are of the same sign). 
D) 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 14

Who is not counted in the U.S. labor force?

Accepted Answer

A) A person working 15 hours a week or more not for pay. 
B) A fulltime college student. 
C) A person working at least one hour for pay per week. 
D) Someone actively looking for a job. 
E) A 70-year-old person who supplements his social security payments by working 8 hours each week at minimum wage. 
A) A person working 15 hours a week or more not for pay. 
B) A fulltime college student. 
C) A person working at least one hour for pay per week. 
D) Someone actively looking for a job. 
E) A 70-year-old person who supplements his social security payments by working 8 hours each week at minimum wage.

Question 15

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 participating in the labor market. 
B) The official government statistic on labor force participation is too high, because people working in the underground labor market should be counted as participating in the labor market. 
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 participating 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 participating 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 participating in the labor market. 
B) The official government statistic on labor force participation is too high, because people working in the underground labor market should be counted as participating in the labor market. 
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 participating 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 participating 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.

Question 16

The intertemporal substitution hypothesis suggests that hours of work should

Accepted Answer

A) be greatest during peak wage years. 
B) steadily increase with age. 
C) steadily decrease with age. 
D) be greater for women than for men. 
E) increase during retirement. 
A) be greatest during peak wage years. 
B) steadily increase with age. 
C) steadily decrease with age. 
D) be greater for women than for men. 
E) increase during retirement.

Question 17

When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers?

Accepted Answer

A) 0 
B) 0.5 
C) 1.0 
D) 1.5 
E) 2.0 
A) 0 
B) 0.5 
C) 1.0 
D) 1.5 
E) 2.0

Question 18

The reservation wage likely increases when

Accepted Answer

A) the price of consumption increases. 
B) the wage increases. 
C) the price level (of consumption and wages) increases. 
D) non-labor income increases. 
E) one is a discouraged worker. 
A) the price of consumption increases. 
B) the wage increases. 
C) the price level (of consumption and wages) increases. 
D) non-labor income increases. 
E) one is a discouraged worker.

Question 19

Which of the following is not a property of standard indifference curves in a leisure-consumption model?

Accepted Answer

A) Indifference curves tend to be downward sloping. 
B) Higher indifference curves (to the northeast) indicate higher levels of utility. 
C) Indifference curves tend to be convex to the origin. 
D) There is an indifference curve passing through every leisure-consumption bundle. 
E) Indifference curves intersect one another. 
A) Indifference curves tend to be downward sloping. 
B) Higher indifference curves (to the northeast) indicate higher levels of utility. 
C) Indifference curves tend to be convex to the origin. 
D) There is an indifference curve passing through every leisure-consumption bundle. 
E) Indifference curves intersect one another.

Question 20

The single most important phenomenon in the U.S. labor market in the second half of the 20th century was

Accepted Answer

A) the drastic reduction in the labor force participation rate of males. 
B) the drastic increase in the labor force participation rate of females. 
C) the elimination of the glass ceiling. 
D) the increase in the average number of hours worked each week. 
E) the elimination of child poverty. 
A) the drastic reduction in the labor force participation rate of males. 
B) the drastic increase in the labor force participation rate of females. 
C) the elimination of the glass ceiling. 
D) the increase in the average number of hours worked each week. 
E) the elimination of child poverty.

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

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

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

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?

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 labor force participation rate?

Which of the following best describes the historical pattern in the average number of hours worked per week in the United States when the large drop during the Great Depression is ignored?

What is the discouraged worker effect?

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

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 non-labor income of $220 per week?

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

What is the added worker effect?

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

Who is not counted in the U.S. labor force?

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

The intertemporal substitution hypothesis suggests that hours of work should

When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers?

The reservation wage likely increases when

Which of the following is not a property of standard indifference curves in a leisure-consumption model?

The single most important phenomenon in the U.S. labor market in the second half of the 20^th century was

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

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

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

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

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?

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 labor force participation rate?

Which of the following best describes the historical pattern in the average number of hours worked per week in the United States when the large drop during the Great Depression is ignored?

What is the discouraged worker effect?

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

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 non-labor income of $220 per week?

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

What is the added worker effect?

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

Who is not counted in the U.S. labor force?

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

The intertemporal substitution hypothesis suggests that hours of work should

When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers?

The reservation wage likely increases when

Which of the following is not a property of standard indifference curves in a leisure-consumption model?

The single most important phenomenon in the U.S. labor market in the second half of the 20th century was

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

The single most important phenomenon in the U.S. labor market in the second half of the 20^th century was