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

Which of the following statements about unemployment benefits is correct?

Accepted Answer

A)  Unemployment benefits reduce search efforts but raise unemployment 
B)  Unemployment benefits increase the income uncertainty that workers face 
C)  Unemployment benefits improve the ability of the economy to match each worker with the most appropriate job 
D)  Unemployment benefits do not protect workers against income loss 
A)  Unemployment benefits reduce search efforts but raise unemployment 
B)  Unemployment benefits increase the income uncertainty that workers face 
C)  Unemployment benefits improve the ability of the economy to match each worker with the most appropriate job 
D)  Unemployment benefits do not protect workers against income loss

Question 3

Which of the following causes of unemployment is not associated with a wage rate above the equilibrium level?

Accepted Answer

A)  Unions 
B)  Job search 
C)  Efficiency wages 
D)  Minimum wage laws 
A)  Unions 
B)  Job search 
C)  Efficiency wages 
D)  Minimum wage laws

Question 4

Economists and policymakers must equally consider the problems of short-term unemployment and long-term unemployment in the economy.

Accepted Answer

A) True 
 B)False

Question 5

Explain how a government policy encouraging a parent to stay at home with their young children would reduce unemployment.

Accepted Answer

When the parent is at home and not in pa

Question 6

Mary has been out of the paid workforce in order to raise her children. Now she decides to do paid work and is looking for a job. Which of the following is the correct statement?

Accepted Answer

A)  The number of unemployed increases, and the labour force decreases 
B)  The number of unemployed increases and the labour force is unaffected 
C)  The number of unemployed is unaffected, and the labour force increases 
D)  The number of unemployed increases, and the labour force increases 
A)  The number of unemployed increases, and the labour force decreases 
B)  The number of unemployed increases and the labour force is unaffected 
C)  The number of unemployed is unaffected, and the labour force increases 
D)  The number of unemployed increases, and the labour force increases

Question 7

Efficiency wages are:

Accepted Answer

A)  one explanation for the natural rate of unemployment 
B)  wages paid for time-motion studies 
C)  the lowest wage an employer can pay 
D)  none of the above 
A)  one explanation for the natural rate of unemployment 
B)  wages paid for time-motion studies 
C)  the lowest wage an employer can pay 
D)  none of the above

Question 8

Graph 28-1
  
-Effective collective bargaining will:

Accepted Answer

A)  increase the demand for union workers 
B)  raise the wage of union workers 
C)  decrease the supply of labour in the non-unionised parts of the economy 
D)  none of the above 
A)  increase the demand for union workers 
B)  raise the wage of union workers 
C)  decrease the supply of labour in the non-unionised parts of the economy 
D)  none of the above

Question 9

Most of the economy's unemployment problem is attributable to the relatively few workers who are jobless for long periods of time.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements about unemployment is incorrect?

Accepted Answer

A)  Graduates that are actively searching for work are classed as unemployed 
B)  The highest levels of unemployment tends to be reported in the most affluent neighbourhoods in Australia 
C)  Cyclical unemployment is associated with economic activity 
D)  Structural unemployment is associated with obsolescence 
A)  Graduates that are actively searching for work are classed as unemployed 
B)  The highest levels of unemployment tends to be reported in the most affluent neighbourhoods in Australia 
C)  Cyclical unemployment is associated with economic activity 
D)  Structural unemployment is associated with obsolescence

Question 11

Graph 28-1
  
-The theory of efficiency wages explains why:

Accepted Answer

A)  unions strike for higher wages 
B)  it might be inefficient to pay workers the competitive equilibrium wage 
C)  the actual unemployment rate varies around the long-run equilibrium unemployment rate 
D)  it is efficient for workers to work hard for their wages 
A)  unions strike for higher wages 
B)  it might be inefficient to pay workers the competitive equilibrium wage 
C)  the actual unemployment rate varies around the long-run equilibrium unemployment rate 
D)  it is efficient for workers to work hard for their wages

Question 12

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 13

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 14

Firms may find it profitable to pay wages above the equilibrium level in order to give workers an incentive to avoid shirking their responsibilities.

Accepted Answer

A) True 
 B)False

Question 15

Janet loses her job and decides to sit around at home for a few weeks. Ceteris paribus:

Accepted Answer

A)  The unemployment rate is unaffected, and the labour-force participation rate increases 
B)  The unemployment rate increases, and the labour-force participation rate is unaffected 
C)  The unemployment rate increases, and the labour-force participation rate increases 
D)  The unemployment rate increases, and the labour-force participation rate decreases 
A)  The unemployment rate is unaffected, and the labour-force participation rate increases 
B)  The unemployment rate increases, and the labour-force participation rate is unaffected 
C)  The unemployment rate increases, and the labour-force participation rate increases 
D)  The unemployment rate increases, and the labour-force participation rate decreases

Question 16

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

Accepted Answer

In an employment relationship, the firm

Question 17

When a union raises the wage above the equilibrium level, ceteris paribus:

Accepted Answer

A)  it reduces the quantity of labour supplied 
B)  it increases the quantity of labour demanded 
C)  it results in surplus of labour in the labour market 
D)  it decreases unemployment 
A)  it reduces the quantity of labour supplied 
B)  it increases the quantity of labour demanded 
C)  it results in surplus of labour in the labour market 
D)  it decreases unemployment

Question 18

Efficiency-wage theory suggests that to improve workers performance, firms should:

Accepted Answer

A)  fire all existing workers and hire new ones 
B)  spend more money and effort on monitoring 
C)  raise wages above the market equilibrium level 
D)  give incentive pay to employees for dobbing in their fellow workers who are shirking 
A)  fire all existing workers and hire new ones 
B)  spend more money and effort on monitoring 
C)  raise wages above the market equilibrium level 
D)  give incentive pay to employees for dobbing in their fellow workers who are shirking

Question 19

Cyclical unemployment refers to:

Accepted Answer

A)  year-to-year fluctuations of unemployment around its natural rate 
B)  the experience with unemployment of a typical worker over his or her life cycle 
C)  long-term trends in unemployment 
D)  none of the above 
A)  year-to-year fluctuations of unemployment around its natural rate 
B)  the experience with unemployment of a typical worker over his or her life cycle 
C)  long-term trends in unemployment 
D)  none of the above

Question 20

Which of the following statements is an example of moral hazard?

Accepted Answer

A)  A car driver with car insurance drives more safely 
B)  A babysitter allows children to watch more television than the children's parents would wish 
C)  Buyers of private health insurance know more about their own health problems than do health funds 
D)  Sellers of used cars know their cars' defects whereas buyers often do not 
A)  A car driver with car insurance drives more safely 
B)  A babysitter allows children to watch more television than the children's parents would wish 
C)  Buyers of private health insurance know more about their own health problems than do health funds 
D)  Sellers of used cars know their cars' defects whereas buyers often do not

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?

Which of the following statements about unemployment benefits is correct?

Which of the following causes of unemployment is not associated with a wage rate above the equilibrium level?

Economists and policymakers must equally consider the problems of short-term unemployment and long-term unemployment in the economy.

Explain how a government policy encouraging a parent to stay at home with their young children would reduce unemployment.

Mary has been out of the paid workforce in order to raise her children. Now she decides to do paid work and is looking for a job. Which of the following is the correct statement?

Efficiency wages are:

Graph 28-1 -Effective collective bargaining will:

Most of the economy's unemployment problem is attributable to the relatively few workers who are jobless for long periods of time.

Which of the following statements about unemployment is incorrect?

Graph 28-1 -The theory of efficiency wages explains why:

The unemployment rate is never zero because:

Sectoral shifts in the economy:

Firms may find it profitable to pay wages above the equilibrium level in order to give workers an incentive to avoid shirking their responsibilities.

Janet loses her job and decides to sit around at home for a few weeks. Ceteris paribus:

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

When a union raises the wage above the equilibrium level, ceteris paribus:

Efficiency-wage theory suggests that to improve workers performance, firms should:

Cyclical unemployment refers to:

Which of the following statements is an example of moral hazard?

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

Business Strategy

Competition Policy

Monopolistic Competition

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

Five Debates Over Macroeconomic Policy

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