Question 1

According to the theory of efficiency wages:

Accepted Answer

A)  firms may choose to pay a wage above the competitive equilibrium level to reduce worker turnover 
B)  firms will pay a higher wage to impose a cost on shirking 
C)  firms will pay a high wage to provide an incentive to work hard 
D)  all of the above 
A)  firms may choose to pay a wage above the competitive equilibrium level to reduce worker turnover 
B)  firms will pay a higher wage to impose a cost on shirking 
C)  firms will pay a high wage to provide an incentive to work hard 
D)  all of the above

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

If David recently graduated and is looking for a job, then, ceteris paribus, the unemployment rate will fall and the labour-force participation rate will fall.

Accepted Answer

A) True 
 B)False

Question 4

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 5

The natural rate of unemployment is:

Accepted Answer

A)  unchanging 
B)  inevitable 
C)  always increasing 
D)  affected by minimum wage laws 
A)  unchanging 
B)  inevitable 
C)  always increasing 
D)  affected by minimum wage laws

Question 6

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 7

Which of the following contributes to the natural rate of unemployment?

Accepted Answer

A)  Unions 
B)  Efficiency wages 
C)  Job search 
D)  All of the above 
A)  Unions 
B)  Efficiency wages 
C)  Job search 
D)  All of the above

Question 8

Unemployment rate is:

Accepted Answer

A)  Number of unemployed × 100
Population 
B)  Number of unemployed × 100
Adult population 
C)  Number of unemployed × 100
Labour force 
D)  Number of unemployed × 100
Number of employed 
A)  Number of unemployed × 100
Population 
B)  Number of unemployed × 100
Adult population 
C)  Number of unemployed × 100
Labour force 
D)  Number of unemployed × 100
Number of employed

Question 9

Most of the economy's structural unemployment problem is attributable to:

Accepted Answer

A)  relatively large numbers of workers who are jobless for relatively long periods of time 
B)  relatively large numbers of workers who are jobless for relatively short periods of time 
C)  relatively few workers who are jobless for relatively long periods of time 
D)  relatively few workers who are jobless for relatively short periods of time 
A)  relatively large numbers of workers who are jobless for relatively long periods of time 
B)  relatively large numbers of workers who are jobless for relatively short periods of time 
C)  relatively few workers who are jobless for relatively long periods of time 
D)  relatively few workers who are jobless for relatively short periods of time

Question 10

An economy's natural rate of unemployment refers to the lowest rate of unemployment the economy experiences over the business cycle.

Accepted Answer

A) True 
 B)False

Question 11

What is the distinction between the natural rate of unemployment and cyclical unemployment?

Accepted Answer

The natural rate of unemployment is the

Question 12

In 2010 in Australia, 11.1497 million people were employed, and 0.629 million people were unemployed. The adult population was 18.014.150 million. Therefore, the labour force was:

Accepted Answer

A)  5.92 million 
B)  11.012 million 
C)  11.778 million 
D)  16.324 million 
A)  5.92 million 
B)  11.012 million 
C)  11.778 million 
D)  16.324 million

Question 13

What is the theory of efficiency wages?

Accepted Answer

According to the theory of efficiency wa

Question 14

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

Question 15

Which of the following equations is correct?

Accepted Answer

A)  Labour force = Population - Labour not in the labour force 
B)  Labour force = Population - Number of unemployed 
C)  Labour force = Number of employed + Number of unemployed 
D)  Labour force = Adult population - Number of unemployed 
A)  Labour force = Population - Labour not in the labour force 
B)  Labour force = Population - Number of unemployed 
C)  Labour force = Number of employed + Number of unemployed 
D)  Labour force = Adult population - Number of unemployed

Question 16

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 compan

Question 17

Explain when minimum laws are binding and result in unemployment.

Accepted Answer

When the minimum wage is set a

Question 18

If an unemployed person stops looking for work, then, ceteris paribus:

Accepted Answer

A)  the labour-force participation rate decreases 
B)  the size of the labour force falls 
C)  the labour-force participation rate increases 
D)  both A and B are correct 
A)  the labour-force participation rate decreases 
B)  the size of the labour force falls 
C)  the labour-force participation rate increases 
D)  both A and B are correct

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

Exam 28: The Natural Rate of Unemployment

According to the theory of efficiency wages:

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

If David recently graduated and is looking for a job, then, ceteris paribus, the unemployment rate will fall and the labour-force participation rate will fall.

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

The natural rate of unemployment is:

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

Which of the following contributes to the natural rate of unemployment?

Unemployment rate is:

Most of the economy's structural unemployment problem is attributable to:

An economy's natural rate of unemployment refers to the lowest rate of unemployment the economy experiences over the business cycle.

What is the distinction between the natural rate of unemployment and cyclical unemployment?

In 2010 in Australia, 11.1497 million people were employed, and 0.629 million people were unemployed. The adult population was 18.014.150 million. Therefore, the labour force was:

What is the theory of efficiency wages?

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.

Which of the following equations is correct?

Explain when minimum laws are binding and result in unemployment.

If an unemployed person stops looking for work, then, ceteris paribus:

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

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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