Question 1

Cyclical unemployment occurs because

Accepted Answer

A) labor markets are heterogeneous and dynamic. 
B) structural barriers such as unions and minimum wage laws keep wages too high to clear the labor market. 
C) there are long-term mismatches between workers skills and jobs available. 
D) the economy is experiencing a period of unusually low production.

Question 2

The two most important factors contributing to increased productivity in industrialized countries in the twentieth century were:

Accepted Answer

A) higher relative prices and a larger labor supply. 
B) higher relative prices and technological progress. 
C) technological progress and increases in the capital stock. 
D) technological progress and increases in the labor supply.

Question 3

Assume that the union wage already exceeds the market-clearing wage. If the union wage is increased, holding other factors constant, then the number unemployed ________ and the number employed ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) increases; does not change 
D) decreases; increases

Question 4

Structural unemployment is increased when the wage is kept above the market-clearing wage by:

Accepted Answer

A) unemployment insurance. 
B) worker mobility. 
C) skill-biased technological change. 
D) labor unions.

Question 5

Arthur is an unskilled worker who is currently unemployed. He has been offered a job that pays $40 a day, but he is currently receiving unemployment insurance benefits equal to $50 a day, so he chooses not to accept the job and to continue looking for a better job. Arthur is ________ unemployed.

Accepted Answer

A) frictionally 
B) structurally 
C) cyclically 
D) not

Question 6

Martha did not like her job as a receptionist, so she quit and is looking for one that better suits her artistic talents. Ting Pei would like to work, but employers are not willing to hire him because he does not speak English. Martha is ________ unemployed and Ting Pei is ________ unemployed.

Accepted Answer

A) frictionally; structurally 
B) structurally; frictionally 
C) cyclically; structurally 
D) structurally; cyclically

Question 7

Factors increasing the U.S. labor supply and thereby contributing to the slowdown in real-wage growth that began in the 1970s include ________ and ________.

Accepted Answer

A) skill-biased technological change; globalization 
B) increased labor force participation by women; the coming-of-age of the baby-boom generation 
C) technological progress; diminishing returns to labor 
D) increasing wage inequality; globalization

Question 8

Minimum wage laws contribute to structural unemployment by:

Accepted Answer

A) keeping wages above the market-clearing level. 
B) keeping wages below the market-clearing level. 
C) allowing unemployed workers to search longer or less intensively for jobs. 
D) forcing unemployed workers to take the first job offered to them.

Question 9

The growth rate of average annual earnings in the United States from 1973 to 1995 was:

Accepted Answer

A) higher than it was from 1960 to 1973. 
B) lower than it was from 1960 to 1973. 
C) the same as it was from 1960 to 1973. 
D) roughly equal to zero.

Question 10

The extra production gained by employing one more worker is called the:

Accepted Answer

A) real wage. 
B) nominal wage. 
C) marginal product. 
D) surplus product.

Question 11

If the price of tables sold by All-Oak Table Co. increases from $400 to $500, then the:

Accepted Answer

A) supply of labor to All-Oak Table Co. increases. 
B) supply of labor to All-Oak Table Co. decreases. 
C) demand for labor by All-Oak Table Co. decreases. 
D) demand for labor by All-Oak Table Co. increases.

Question 12

Which of the following is an example of structural unemployment?

Accepted Answer

A) Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year. 
B) Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. 
C) Alan, a software engineer, lost his job when the internet startup he worked for went bankrupt. He interviewed with five companies in the area before taking a job with another firm in the industry. 
D) Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.

Question 13

Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for $5. $$\begin{array} { | c | c r } 
\hline \text { Number of Warkers } & \text { Pizzas Baked Per Day } \
\hline 0 & & 0 \
\hline 1 & & 10 \
\hline 2 & & 18\
\hline 3 & & 24 \
\hline 4 & & 30 \
\hline 5 & &32 \
\hline
\end{array}$$  
How many workers will Joe hire if he must pay each one $45 a day?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4

Question 14

Based on the figure, if a union contract requires that workers be paid $25 per hour, there will be ________ unemployed workers.

Accepted Answer

A) 9 
B) 12 
C) 21 
D) 31

Question 15

The value of the marginal product of labor equals the marginal product of labor times the:

Accepted Answer

A) real wage. 
B) nominal wage. 
C) price of output. 
D) quantity of labor.

Question 16

In the United Sates, the average annual rate of growth of real wages was fastest in the period:

Accepted Answer

A) 1960-1973. 
B) 1960-1995. 
C) 1996-2010. 
D) 1973-1995.

Question 17

Compared to the 1960 and 1973 period, average real earnings of workers ________ from 1973 to 1995 and then ________ from 2007 to 2016.

Accepted Answer

A) declined; slowed again 
B) declined; grew 
C) grew; grew at about the same rate 
D) grew more rapidly; declined

Question 18

As a result of a war in the country of Omega, refugees flee to the country of Alpha to seek employment. Holding other factors constant, the influx of refugees will ________ the real wage in Alpha and ________ employment in Alpha.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; decrease 
D) decrease; increase

Question 19

Structural unemployment is increased when workers can afford to be unemployed for longer periods of time as a result of:

Accepted Answer

A) unemployment insurance. 
B) worker mobility. 
C) minimum wage laws. 
D) skill-biased technological change.

Question 20

Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for $5.  
$$\begin{array} { | c | c r } 
\hline \text { Number of Warkers } & \text { Pizzas Baked Per Day } \
\hline 0 & & 0 \
\hline 1 & & 10 \
\hline 2 & & 18\
\hline 3 & & 24 \
\hline 4 & & 30 \
\hline 5 & &32 \
\hline
\end{array}$$ How many workers will Joe hire if he must pay each one $35 a day?

Accepted Answer