Question 1

Suppose an individual worker is on the upsloping portion of her labor supply curve.Then for a wage increase the:

Accepted Answer

A) income and substitution effects both increase desired work hours 
B) income and substitution effects are equal 
C) income effect dominates the substitution effect 
D) substitution effect dominates the income effect 
A) income and substitution effects both increase desired work hours 
B) income and substitution effects are equal 
C) income effect dominates the substitution effect 
D) substitution effect dominates the income effect

Question 2

Which one of the following would be most likely to shift the labor supply curve to the right?

Accepted Answer

A) A decrease in the wage rate 
B) A change in the indifference map following deterioration of working conditions 
C) A change in the indifference map following an improvement in working conditions 
D) A significant increase in dividend and interest income 
A) A decrease in the wage rate 
B) A change in the indifference map following deterioration of working conditions 
C) A change in the indifference map following an improvement in working conditions 
D) A significant increase in dividend and interest income

Question 3

refer to the following diagram:
  
-Suppose this worker's union negotiates an increase in the straight-time wage from $8 to $9.33 per hour with no bonus for overtime.This plan would allow earnings of $560 at 60 hours per week.Assuming this worker can freely choose the number of hours worked,he will choose to work:

Accepted Answer

A) 60 hours per week 
B) fewer than 60 hours per week 
C) more than 60 hours per week 
D) more than 60 hours per week if the income effect dominates; less otherwise 
A) 60 hours per week 
B) fewer than 60 hours per week 
C) more than 60 hours per week 
D) more than 60 hours per week if the income effect dominates; less otherwise

Question 4

Questions   are based on the following diagram:
 
-The equilibrium positions shown imply that in the relevant wage range,this person is:

Accepted Answer

A) on the upsloping segment of the individual labor supply curve 
B) on the backward-bending segment of the individual labor supply curve 
C) at the point on the individual labor supply curve where the income and substitution effects are equal 
D) being offered a wage less than the reservation wage 
A) on the upsloping segment of the individual labor supply curve 
B) on the backward-bending segment of the individual labor supply curve 
C) at the point on the individual labor supply curve where the income and substitution effects are equal 
D) being offered a wage less than the reservation wage

Question 5

In the years following enactment of welfare reform in 1996,welfare case loads:

Accepted Answer

A) dropped slightly 
B) increased slightly 
C) dropped by more than 50% 
D) increased by almost 50% 
A) dropped slightly 
B) increased slightly 
C) dropped by more than 50% 
D) increased by almost 50%

Question 6

An increase in the wage rate will increase desired hours of work if:

Accepted Answer

A) the income effect and substitution effect cancel one another 
B) the income effect dominates the substitution effect 
C) the substitution effect dominates the income effect 
D) accompanied by an increase in nonwage income 
A) the income effect and substitution effect cancel one another 
B) the income effect dominates the substitution effect 
C) the substitution effect dominates the income effect 
D) accompanied by an increase in nonwage income

Question 7

refer to the following diagram:
  
-If this person's wage rate falls as illustrated in the diagram,then:

Accepted Answer

A) the substitution effect is stronger than the income effect 
B) the income effect is stronger than the substitution effect 
C) this person's non-wage income will fall as well 
D) the substitution effect causes desired work hours to increase 
A) the substitution effect is stronger than the income effect 
B) the income effect is stronger than the substitution effect 
C) this person's non-wage income will fall as well 
D) the substitution effect causes desired work hours to increase

Question 8

The higher the individual's wage rate:

Accepted Answer

A) the steeper the budget constraint 
B) the lower the marginal rate of substitution of leisure for income 
C) the greater the desired number of hours of work 
D) the greater the desired number of hours of leisure 
A) the steeper the budget constraint 
B) the lower the marginal rate of substitution of leisure for income 
C) the greater the desired number of hours of work 
D) the greater the desired number of hours of leisure

Question 9

Suppose an income maintenance program offers a basic benefit of $7500 per year and the benefit-reduction rate is 33 1/3%.The break-even level of income is then:

Accepted Answer

A) $2500 
B) $7500 
C) $15,000 
D) $22,500 
A) $2500 
B) $7500 
C) $15,000 
D) $22,500

Question 10

The Personal Responsibility and Work Opportunity Act of 1996:

Accepted Answer

A) moved control over welfare spending from states to the federal government 
B) removed lifetime limits on welfare eligibility 
C) with few exceptions,requires welfare recipients to work after two years of receiving assistance 
D) provided immediate welfare benefits to qualified immigrants 
A) moved control over welfare spending from states to the federal government 
B) removed lifetime limits on welfare eligibility 
C) with few exceptions,requires welfare recipients to work after two years of receiving assistance 
D) provided immediate welfare benefits to qualified immigrants

Question 11

The Earned Income Tax Credit:

Accepted Answer

A) reduces desired hours of work for those already in the labor force 
B) increases the labor force participation rate 
C) always increases with increases in earnings 
D) is phased out as the number of children increases 
A) reduces desired hours of work for those already in the labor force 
B) increases the labor force participation rate 
C) always increases with increases in earnings 
D) is phased out as the number of children increases

Question 12

Indifference curves are convex to the origin because:

Accepted Answer

A) at a lower income,a person is more willing to sacrifice income for additional leisure 
B) at a lower income,a person is less willing to sacrifice income for additional leisure 
C) at any income level,a person is willing to sacrifice the same amount of income for additional leisure 
D) the marginal rate of substitution of leisure for income is negative 
A) at a lower income,a person is more willing to sacrifice income for additional leisure 
B) at a lower income,a person is less willing to sacrifice income for additional leisure 
C) at any income level,a person is willing to sacrifice the same amount of income for additional leisure 
D) the marginal rate of substitution of leisure for income is negative

Question 13

Empirical evidence indicates that inheritances _____ labor force participation; further,persons receiving inheritances tend to be _____ likely to work in the years preceding the inheritance.

Accepted Answer

A) have no impact on; less 
B) reduce; more 
C) reduce; equally 
D) reduce; less 
A) have no impact on; less 
B) reduce; more 
C) reduce; equally 
D) reduce; less

Question 14

Which of the following would unambiguously predict a decrease in desired hours of work?

Accepted Answer

A) The substitution effect of a wage decrease 
B) The income effect of a wage decrease 
C) A wage increase 
D) The substitution effect of a decline in income tax rates 
A) The substitution effect of a wage decrease 
B) The income effect of a wage decrease 
C) A wage increase 
D) The substitution effect of a decline in income tax rates

Question 15

Questions   are based on the following diagram:
 
-The equilibrium positions shown in the diagram imply that for a wage increase:

Accepted Answer

A) both the income and substitution effects increase desired work hours 
B) both the income and substitution effects reduce desired work hours 
C) the income effect increases desired work hours and the substitution effect reduces desired work hours 
D) the income effect reduces desired work hours and the substitution effect increases desired work hours 
A) both the income and substitution effects increase desired work hours 
B) both the income and substitution effects reduce desired work hours 
C) the income effect increases desired work hours and the substitution effect reduces desired work hours 
D) the income effect reduces desired work hours and the substitution effect increases desired work hours

Question 16

Questions are based on the following diagram, which shows a labor supply curve for an individual.

-If this person were now willing to supply only H1 hours of work at W3,we could conclude that:

Accepted Answer

A) labor supply increased (the curve shifted to the right) 
B) labor supply decreased (the curve shifted to the left) 
C) the person's preferences must have changed 
D) the substitution and income effects are now equal 
A) labor supply increased (the curve shifted to the right) 
B) labor supply decreased (the curve shifted to the left) 
C) the person's preferences must have changed 
D) the substitution and income effects are now equal

Question 17

Compared to workers with less education,people who have more education tend to earn higher wages and have higher pensions upon retirement.Given this observation,which of the following statements best explains why those persons with more education also retire at a later age?

Accepted Answer

A) If tastes for leisure are the same,the effect of the higher pension must outweigh the effects of the higher wages 
B) If tastes for leisure are the same,the effects of the higher wages must outweigh the effects of the higher pensions 
C) Since higher wages and pensions both suggest a lower retirement age,those with more education must value leisure less 
D) Regardless of the tastes for leisure,the higher wages and pensions would both suggest a higher retirement age 
A) If tastes for leisure are the same,the effect of the higher pension must outweigh the effects of the higher wages 
B) If tastes for leisure are the same,the effects of the higher wages must outweigh the effects of the higher pensions 
C) Since higher wages and pensions both suggest a lower retirement age,those with more education must value leisure less 
D) Regardless of the tastes for leisure,the higher wages and pensions would both suggest a higher retirement age

Question 18

refer to the following diagram:
  
-The person has non-wage income of:

Accepted Answer

A) $0 
B) $10 
C) $192 
D) $240 
A) $0 
B) $10 
C) $192 
D) $240

Question 19

An individual whose MRS L,Y exceeds the wage at her current combination of leisure and income could increase utility by:

Accepted Answer

A) working more hours 
B) working fewer hours 
C) increasing her income 
D) none of the above; her utility is maximized 
A) working more hours 
B) working fewer hours 
C) increasing her income 
D) none of the above; her utility is maximized

Question 20

refer to the following diagram:
  
-Suppose this worker is currently working 40 hours per week and earning $8 per hour.Which one of the following would cause a move to point B,and the subsequent increase in work hours to 60?

Accepted Answer

A) The availability of overtime work at $12 per hour 
B) The availability of a moonlighting job that pays $6 per hour 
C) An increase in the straight-time wage to $9.33 per hour 
D) An increase in non-wage income of $240 
A) The availability of overtime work at $12 per hour 
B) The availability of a moonlighting job that pays $6 per hour 
C) An increase in the straight-time wage to $9.33 per hour 
D) An increase in non-wage income of $240

Suppose an individual worker is on the upsloping portion of her labor supply curve.Then for a wage increase the:

Which one of the following would be most likely to shift the labor supply curve to the right?

Questions are based on the following diagram: -The equilibrium positions shown imply that in the relevant wage range,this person is:

In the years following enactment of welfare reform in 1996,welfare case loads:

An increase in the wage rate will increase desired hours of work if:

refer to the following diagram: -If this person's wage rate falls as illustrated in the diagram,then:

The higher the individual's wage rate:

Suppose an income maintenance program offers a basic benefit of $7500 per year and the benefit-reduction rate is 33 1/3%.The break-even level of income is then:

The Personal Responsibility and Work Opportunity Act of 1996:

The Earned Income Tax Credit:

Indifference curves are convex to the origin because:

Empirical evidence indicates that inheritances _ labor force participation; further,persons receiving inheritances tend to be _ likely to work in the years preceding the inheritance.

Which of the following would unambiguously predict a decrease in desired hours of work?

Questions are based on the following diagram: -The equilibrium positions shown in the diagram imply that for a wage increase:

Questions are based on the following diagram, which shows a labor supply curve for an individual. -If this person were now willing to supply only H₁ hours of work at W₃,we could conclude that:

Compared to workers with less education,people who have more education tend to earn higher wages and have higher pensions upon retirement.Given this observation,which of the following statements best explains why those persons with more education also retire at a later age?

refer to the following diagram: -The person has non-wage income of:

An individual whose MRS L,Y exceeds the wage at her current combination of leisure and income could increase utility by:

refer to the following diagram: -Suppose this worker is currently working 40 hours per week and earning $8 per hour.Which one of the following would cause a move to point B,and the subsequent increase in work hours to 60?

Labor Economics: Introduction and Overview

Population, Participation Rates, and Hours of Work

Labor Quality: Investing in Human Capital

The Demand for Labor

Wage Determination and the Allocation of Labor

Alternative Pay Schemes and Labor Efficiency

The Wage Structure

Mobility,Migration,and Efficiency

Labor Unions and Collective Bargaining

The Economic Impact of Unions

Government and the Labor Market: Employment, Expenditures, and Taxation

Government and the Labor Market: Legislation and Regulation

Labor Market Discrimination

Job Search: External and Internal

The Distribution of Personal Earnings

Labor Productivity: Wages,Prices,and Employment

Employment and Unemployment

Filters

Exam 2: The Theory of Individual Labor Supply

Suppose an individual worker is on the upsloping portion of her labor supply curve.Then for a wage increase the:

Which one of the following would be most likely to shift the labor supply curve to the right?

Questions are based on the following diagram: -The equilibrium positions shown imply that in the relevant wage range,this person is:

In the years following enactment of welfare reform in 1996,welfare case loads:

An increase in the wage rate will increase desired hours of work if:

refer to the following diagram: -If this person's wage rate falls as illustrated in the diagram,then:

The higher the individual's wage rate:

Suppose an income maintenance program offers a basic benefit of $7500 per year and the benefit-reduction rate is 33 1/3%.The break-even level of income is then:

The Personal Responsibility and Work Opportunity Act of 1996:

The Earned Income Tax Credit:

Indifference curves are convex to the origin because:

Empirical evidence indicates that inheritances _____ labor force participation; further,persons receiving inheritances tend to be _____ likely to work in the years preceding the inheritance.

Which of the following would unambiguously predict a decrease in desired hours of work?

Questions are based on the following diagram: -The equilibrium positions shown in the diagram imply that for a wage increase:

Questions are based on the following diagram, which shows a labor supply curve for an individual. -If this person were now willing to supply only H1 hours of work at W3,we could conclude that:

Compared to workers with less education,people who have more education tend to earn higher wages and have higher pensions upon retirement.Given this observation,which of the following statements best explains why those persons with more education also retire at a later age?

refer to the following diagram: -The person has non-wage income of:

An individual whose MRS L,Y exceeds the wage at her current combination of leisure and income could increase utility by:

refer to the following diagram: -Suppose this worker is currently working 40 hours per week and earning $8 per hour.Which one of the following would cause a move to point B,and the subsequent increase in work hours to 60?

Labor Economics: Introduction and Overview

Population, Participation Rates, and Hours of Work

Labor Quality: Investing in Human Capital

The Demand for Labor

Wage Determination and the Allocation of Labor

Alternative Pay Schemes and Labor Efficiency

The Wage Structure

Mobility,Migration,and Efficiency

Labor Unions and Collective Bargaining

The Economic Impact of Unions

Government and the Labor Market: Employment, Expenditures, and Taxation

Government and the Labor Market: Legislation and Regulation

Labor Market Discrimination

Job Search: External and Internal

The Distribution of Personal Earnings

Labor Productivity: Wages,Prices,and Employment

Employment and Unemployment

Filters

Empirical evidence indicates that inheritances _ labor force participation; further,persons receiving inheritances tend to be _ likely to work in the years preceding the inheritance.

Questions are based on the following diagram, which shows a labor supply curve for an individual. -If this person were now willing to supply only H₁ hours of work at W₃,we could conclude that: