Question 1

Which of the following explains why increasing the minimum wage may fail to reduce income inequality or the poverty rate?

Accepted Answer

A)   The Wessel's effect only applies to those workers with fringe benefits.
B)   Employers may expect increased effort from workers after a minimum wage increase.
C)   The majority of those affected by the minimum wage live in households with aggregate income far above the poverty line.
D)   The minimum wage causes an increase in the out of poverty escape rate.
E)   Earning the minimum wage cannot give the worker enough income to put him above the poverty line. C

Question 2

Today the federal minimum wage is and it covers almost of workers.

Accepted Answer

A)   4.25;50 percent
B)   10.25;50 percent
C)   7.25;90 percent
D)   5.25;90 percent
E)   8.00;75 percent D

Question 3

In practice,the ______ of the minimum wage is usually ______.

Accepted Answer

A)   coverage;incomplete
B)   coverage;complete
C)   enforcement;complete
D)   effect;trivial
E)   enforcement;trivial A

Question 4

The value of the minimum wage has declined markedly since ______ and today its real value is approximately ______ what it was over half a century ago.

Accepted Answer

A)   the 1950s;75 percent of
B)   the 1950s;equal to
C)   the mid-1970s;equal to
D)   the 1980s;75 percent of
E)   the 1980s;equal to

Question 5

Which of the following is NOT a reason that the real value of the minimum wage fluctuates considerably over time?

Accepted Answer

A)   Sporadic changes to the nominal minimum wage.
B)   Inconsistent enforcement of minimum wage legislation.
C)   Inflation.
D)   The political difficulty with which changes in the minimum wage occur.
E)   Changes in prices over time.

Question 6

______ in the minimum wage could discourage schooling investments by making education ______ attractive relative to work.

Accepted Answer

A)   An increase;more
B)   An increase;less
C)   A decrease;more
D)   A decrease;less
E)   There is no causal relationship between the minimum wage and education.

Question 7

The minimum wage was introduced in the United States as part of the:

Accepted Answer

A)   Fair Labor Standards Act of 1938.
B)   Social Security Act of 1952.
C)   Equal Pay Act of 1963.
D)   Civil Rights Act of 1964.
E)   Oaxaca decomposition.

Question 8

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will:

Accepted Answer

A)   reduce the demand for labor in the non-minimum-wage sector.
B)   cause workers to move to the non-minimum-wage sector.
C)   decrease the equilibrium wage in the minimum-wage sector.
D)   increase unemployment in the non-minimum-wage sector.
E)   decrease employment in the non-minimum-wage sector.

Question 9

Today,the federal minimum wage is set at $5.25,the minimum wage in California is set at $8.00,and the minimum wage in Ohio is $5.15.A worker covered by the minimum wage in California must be paid at least and a worker covered by the minimum wage in Ohio must be paid at least ______.

Accepted Answer

A)   $8.00;$8.00
B)   $8.00;$5.25
C)   $8.00;$5.15
D)   $5.25;$5.25
E)   $5.25;$8.00

Question 10

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will NOT:

Accepted Answer

A)   reduce the demand for labor in the minimum-wage sector.
B)   cause workers to move to the non-minimum-wage sector.
C)   increase employment in the non-minimum-wage sector.
D)   decrease employment in the minimum-wage sector.
E)   increase unemployment in the non-minimum-wage sector.

Question 11

Card,Katz,and Krueger published a series of influential papers in the 1990s that found that ______ in the minimum wage can ______ employment.

Accepted Answer

A)   an increase;increase
B)   an increase;decrease
C)   a decrease;increase
D)   a decrease;decrease
E)   no change;decrease

Question 12

When introduced in the United States,the minimum wage was set at ______ and covered about ______ of all workers.Today the federal minimum wage is ______ and it covers almost ______ of workers.

Accepted Answer

A)   $0.25;50 percent;$4.25;50 percent
B)   $1.00;75 percent;$10.25;50 percent
C)   $0.50;100 percent;$7.25;90 percent
D)   $0.50;75 percent;$7.25;90 percent
E)   $0.25;50 percent;$5.25;90 percent

Question 13

The minimum wage was introduced in the United States as part of the ______ and excluded workers in the ______ sector.

Accepted Answer

A)   Fair Labor Standards Act of 1938;agricultural.
B)   Equal Pay Act of 1963;retail.
C)   Fair Labor Standards Act of 1938;production
D)   Equal Pay Act of 1963;retail
E)   Equal Pay Act of 1963;agricultural

Question 14

Card,Katz,and Krueger's minimum wage findings have come under close scrutiny since their publication.Recent studies have found ______ that in the minimum wage can ______ employment.

Accepted Answer

A)   an increase;increase
B)   an increase;decrease
C)   a decrease;increase
D)   a decrease;decrease
E)   no change;decrease

Question 15

Which of the following is an accurate description of the Wessel's effect?

Accepted Answer

A)   Working productivity is linearly related to educational attainment.
B)   Firms may attempt to undo the effects of an increase in the minimum wage by reducing fringe benefits.
C)   Hourly wages are equal to marginal productivity in a competitive environment.
D)   The minimum wage will tend to increase employment in a monopsony environment.
E)   Oligopoly conditions dampen the effect of a minimum wage.

Question 16

In the competitive model where all workers are covered by the minimum wage and all firms comply with the law,a minimum wage set above the competitive equilibrium wage will ______ employment and ______ unemployment.

Accepted Answer

A)   increase;increase
B)   not affect;decrease
C)   decrease;increase
D)   decrease;decrease
E)   not affect;increase

Question 17

In a monopsony environment,an increase in the minimum wage ______ employment.

Accepted Answer

A)   can increase or decrease
B)   if the labor market is closed will increase
C)   if the labor market is open will increase
D)   will decrease
E)   will not change

Question 18

In which type of market are all workers and firms price takers?

Accepted Answer

A)   Oligopoly
B)   Monopoly
C)   Monopsony
D)   Competitive
E)   Monopolistic competition

Exam 8: Policy Application: the Minimum Wage

Which of the following explains why increasing the minimum wage may fail to reduce income inequality or the poverty rate?

Today the federal minimum wage is and it covers almost of workers.

In practice,the of the minimum wage is usually .

The value of the minimum wage has declined markedly since and today its real value is approximately what it was over half a century ago.

Which of the following is NOT a reason that the real value of the minimum wage fluctuates considerably over time?

in the minimum wage could discourage schooling investments by making education attractive relative to work.

The minimum wage was introduced in the United States as part of the:

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will:

Today,the federal minimum wage is set at $5.25,the minimum wage in California is set at $8.00,and the minimum wage in Ohio is $5.15.A worker covered by the minimum wage in California must be paid at least and a worker covered by the minimum wage in Ohio must be paid at least ______.

In an economy with two distinct sectors,the imposition of a minimum wage above the competitive equilibrium wage in one of those sectors will NOT:

Card,Katz,and Krueger published a series of influential papers in the 1990s that found that in the minimum wage can employment.

When introduced in the United States,the minimum wage was set at and covered about of all workers.Today the federal minimum wage is and it covers almost of workers.

The minimum wage was introduced in the United States as part of the and excluded workers in the sector.

Card,Katz,and Krueger's minimum wage findings have come under close scrutiny since their publication.Recent studies have found that in the minimum wage can employment.

Which of the following is an accurate description of the Wessel's effect?

In the competitive model where all workers are covered by the minimum wage and all firms comply with the law,a minimum wage set above the competitive equilibrium wage will employment and unemployment.

In a monopsony environment,an increase in the minimum wage ______ employment.

In which type of market are all workers and firms price takers?