Applied Labor Economics Exam Bank
Course Introduction
Applied Labor Economics explores the functioning and dynamics of labor markets by examining the behavior of employers and employees in response to changing policies, technologies, and economic environments. The course covers key topics such as wage determination, labor demand and supply, unemployment, human capital investment, discrimination, migration, and the roles of unions and government regulation. Through empirical analysis and case studies, students learn to apply economic theories and quantitative methods to real-world labor market issues, equipping them with the skills to analyze labor policies and trends in various organizational and policy contexts.
Recommended Textbook
Contemporary Labor Economics 10th Edition by Campbell McConnell
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Page 2
Chapter 1: Labor Economics: Introduction and Overview
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Sample Questions
Q1) Because scarcity forces people to make purposeful choices,labor market participants:
A)work as many hours as possible
B)respond to changes in perceived costs and benefits
C)make choices that cannot be predicted
D)must have perfect information
Answer: B
Q2) Which one of the following topics is most suited to macroeconomic analysis?
A)Labor supply decisions of married women
B)Short-run labor demand in a particular industry
C)The individual decision on how much education to obtain
D)The impact of a recession on the country's unemployment rate
Answer: D
Q3) Which one of the following topics is most suited to microeconomic analysis?
A)The average level of real wages
B)The unemployment rate
C)The average level of labor productivity
D)Mobility and migration decisions
Answer: D
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Page 3
Chapter 2: The Theory of Individual Labor Supply
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Q1) 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?
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
Answer: B
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4
Chapter 3: Population, Participation Rates, and Hours of Work
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Sample Questions
Q1) The added-worker effect suggests that:
A)higher wages will attract more persons into the labor market during market expansions
B)when one family member loses a job,other family members may enter the labor force
C)the measured unemployment rate probably understates the true economic hardship associated with unemployment
D)the labor force participation rate will fall as the unemployment rate rises
Answer: B
Q2) Cross-sectional data suggest that all else equal:
A)the male labor force participation rate varies inversely with education
B)the labor force participation rate of single women varies inversely with the reservation wage
C)the labor force participation rate of married men varies inversely with the number of children in the household
D)the labor force participation rate of married women varies inversely with the husband's income
Answer: D
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5
Chapter 4: Labor Quality: Investing in Human Capital
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Sample Questions
Q1) General training:
A)will be paid for by the employee in the form of a reduced wage
B)raises the trainee's value only to the firm that is providing the training
C)helps to make labor a quasi-fixed resource
D)reduces the worker's value to the firm,because the worker's wage rate would have to rise
Q2) "Expenditures on education and training can be treated as investment in human capital." This statement is:
A)true-current expenses are incurred with the expectation they will be more than compensated for by greater future returns
B)true-education must be financed by borrowing money
C)false-the market for college loans is too imperfect to be consistent with investment models
D)false-education is purchased for its current (consumption)value,not its future (investment)value
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Chapter 5: The Demand for Labor
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Sample Questions
Q1) A union leader told its membership that a wage increase,while resulting in some layoffs,would nonetheless increase the total incomes of its membership.The firm replied that a wage increase would reduce the total incomes of its membership.We can conclude that:
A)both the firm and the union believe that labor demand is inelastic,but for different reasons
B)both the firm and the union believe that labor demand is elastic,but for different reasons
C)the union believes that labor demand is elastic while the firm believes it to be inelastic
D)the union believes that labor demand is inelastic while the firm believes it to be elastic
Q2) The slope of line segment OD can be interpreted as the:
A)total product of labor at Y
B)average product of labor at Y
C)value of labor's marginal product at Y
D)greatest possible marginal product of labor
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7
Chapter 6: Wage Determination and the Allocation of Labor
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Sample Questions
Q1) At the profit maximizing level of employment for a monopolist:
A)marginal revenue product equals the value of marginal product
B)marginal revenue product exceeds the value of marginal product
C)value of marginal product equals the marginal wage cost
D)marginal revenue product is less than the value of marginal product
Q2) There will be a shortage of labor in a particular market if:
A)labor supply increases and demand decreases
B)the current wage is above the wage that would clear the market
C)there is a decrease in the price of a substitute resource
D)the current wage is below the wage that would clear the market
Q3) Suppose the wage is currently W<sub>1</sub> and L<sub>1</sub> is the level of employment.If the firm sells its output competitively,the value of the last worker's additional output is _____ and the opportunity cost of the last worker's time is _____:
A)W<sub>1</sub>; W<sub>1</sub>
B)W<sub>1</sub>; W<sub>2</sub>
C)W<sub>1</sub>; W<sub>3</sub>
D)W<sub>2</sub>; W<sub>2</sub>
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Chapter 7: Alternative Pay Schemes and Labor Efficiency
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Sample Questions
Q1) If the actual wage is $7,the wage cost per effective unit of labor is:
A)$3.50
B)$10.00
C)$7.00
D)$14.00
Q2) Salaried workers can be considered "quasi-fixed resources" in that:
A)production is largely independent of the firm's use of salaried workers
B)federal work rules limit the ability of firms to fire salaried workers
C)their work hours typically are fixed
D)raises or promotions may be used to reduce shirking
Q3) "Total compensation" includes:
A)Wages and salaries and all fringe benefits
B)Wages and salaries and public (legally mandated)fringe benefits only
C)Wages and salaries and private (nonmandatory)fringe benefits only
D)Wages and salaries and all fringe benefits net of all personal taxes
Q4) A stock option will have value to a worker if:
A)the firm's stock price is expected to rise
B)the firm's stock price is expected to fall
C)the "grant price" of the stock is expected to exceed its market price
D)none of the above
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Chapter 8: The Wage Structure
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Q1) The wage rate paid workers at Flow,Inc.will most likely exceed that at otherwise identical Stock Co.if:
A)Flow,Inc.is a more prestigious firm than Stock Co.
B)earnings are subject to greater variability at Stock,Co.
C)Stock Co.offers better pension and insurance benefits than Flow,Inc.
D)the demand for labor at Stock Co.exceeds the demand for labor at Flow,Inc.
Q2) Assume that information is perfect,mobility between jobs is costless,and that all nonwage aspects of the two are identical.The outcome shown in the diagram:
A)represents an equilibrium
B)does not represent an equilibrium.The demand for labor in market A will shift rightward,and that in market B will shift leftward until wage rates equalize
C)does not represent an equilibrium.The supply of labor in market A will shift leftward,and that in market B will shift rightward until the wage rates equalize D)does not represent an equilibrium.The supply of labor in market B will shift leftward,and that in market A will shift rightward until the wage rates equalize
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Chapter 9: Mobility,Migration,and Efficiency
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Q1) Which one of the following helps to explain the observed relationship between age and mobility?
A)Older workers tend to have more specific human capital and on-the-job training
B)Older workers tend to have more general training
C)Younger workers have less time to recoup their investment costs
D)Both direct and psychic costs of moving tend to decrease with age.
Q2) In the equation for the net present value of migration,,the term "E<sub>2</sub>" refers to: \[V _ { p } = \sum _ { n = 1 } ^ { N } \frac { E _ { 2 } - E _ { 1 } } { ( 1 + i ) ^ { n } } -
\sum _ { n = 1 } ^ { N } \frac { C } { ( 1 + i ) ^ { n } } - Z\]
A)the net psychic costs of moving
B)the length of time expected on the new job
C)earnings from the new job
D)earnings from the old job
Q3) Which one of the following is a true statement?
A)Less than 3% of workers change occupations in a given year
B)Most individuals who change occupations in a given year are over 50 years old
C)Over 3 million employees are transferred by their employers each year
D)About 30% of geographic job-related moves are accompanied by a change in occupation
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Page 11
Chapter 10: Labor Unions and Collective Bargaining
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Sample Questions
Q1) Economists typically believe that the goal of a union is to:
A)maximize the total employment of its members
B)maximize the total wage income of its members
C)bargain for the highest wage possible
D)increase both the wages and employment of its members
Q2) Which one of the following is a true statement?
A)Although theory suggests the decline of unionization should have increased income inequality,empirical research suggests that the opposite occurred
B)Although theory suggests the decline in unionization should have reduced income inequality,empirical research suggests that the opposite occurred
C)In theory,the decline in unionization may either reduce or increase income inequality,however empirical research suggests it has increased it,particularly among males
D)In theory,the decline in unionization may either reduce or increase income inequality,however empirical research suggests it has reduced it,particularly among females
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Chapter 11: The Economic Impact of Unions
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Q1) Work-time lost as a result of a strike:
A)is generally less costly in service industries than in durable-goods industries
B)is estimated to be more costly than the efficiency losses resulting from union-caused labor misallocation
C)may overstate the cost of a strike if struck employers are able to expand their inventories in anticipation of the strike
D)may understate the cost of a strike if the work stoppage disrupts production in associated industries
Q2) The pure union wage advantage in this market is:
A)20%
B)25%
C)$2
D)More information is needed
Q3) Unions may reduce economic efficiency by:
A)providing an "exit" mechanism
B)insisting promotions be based on ability rather than seniority
C)imposing restrictive work rules
D)reducing worker turnover
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13
Chapter 12: Government and the Labor Market:
Employment, Expenditures, and Taxation
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Sample Questions
Q1) Since 1950,government employment has grown:
A)more quickly at the federal level than the state and local level
B)more quickly at the state and local level than the federal level
C)as quickly at the federal level as the state and local level
D)at the same rate as total U.S.employment
Q2) The provision of a public good is best modeled by the shift to budget line:
A)AB<sub>3</sub> and the subsequent increase in work hours to AC
B)AB<sub>3</sub> and the subsequent decrease in work hours to AE
C)AFB<sub>2</sub> and the subsequent increase in work hours to AC
D)AFB<sub>2</sub> and the subsequent decrease in work hours to AE
Q3) Which of the following best describes the growth of public-sector employment since 1950? As a percentage of total employment:
A)state and local employment have fallen,but federal employment has risen sufficiently to cause overall public-sector employment to rise
B)both federal and state and local employment have grown
C)public-sector employment has fallen,but the absolute level has grown
D)federal employment has fallen,but state and local employment have risen sufficiently to cause overall public-sector employment to rise
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Chapter 13: Government and the Labor Market: Legislation and Regulation
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Q1) Which of the following is given as a justification of the health and safety standards established by OSHA?
A)Workers overestimate the amount of risk associated with jobs,resulting in a larger than optimal wage premium for hazardous jobs
B)Workers underestimate the amount of risk associated with jobs,resulting in a larger than optimal wage premium for hazardous jobs
C)Firm overestimate the amount of risk associated with jobs,resulting in a smaller than optimal wage premium for hazardous jobs
D)Information and occupational mobility are imperfect,so that the wage premium for job safety provides inadequate incentive for firms to provide safety
Q2) The MC<sub>s</sub> curve is upward sloping because:
A)firms initially use relatively low-cost techniques to improve worker safety
B)workers' marginal utility of safety is increasing
C)wages must be increased the more safety is increased
D)more safety allows the firm to pay lower wages,which makes it harder and more costly to recruit workers
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Chapter 14: Labor Market Discrimination
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Sample Questions
Q1) The index of segregation for this economy is:
A).20
B).30
C).40
D).70
Q2) Which one of the following is an example of premarket discrimination:
A)wage discrimination
B)employment discrimination
C)occupational discrimination
D)human capital discrimination
Q3) Francine Blau and Lawrence Kahn have reported that the gender pay gap is larger in the United States than in countries such as Sweden,Belgium and Australia because:
A)American women tend to have less education than women in other countries
B)The U.S.has not been as committed to equal pay for women as other countries
C)There is a relatively small gap in pay between low- and high-skilled workers in the U.S.and women are disproportionately represented in lower-skilled jobs
D)There is a relatively large gap in pay between low- and high-skilled workers in the U.S.and women are disproportionately represented in low-skilled jobs
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Chapter 15: Job Search: External and Internal
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Q1) The job search model implies that:
A)the longer the expected job tenure,the lower the acceptance wage
B)the higher the acceptance wage,the shorter the expected search duration
C)expected search duration is longer during a recession
D)if job searchers perceive that a recession is temporary,they will reduce their acceptance wages
Q2) Which of the following is not typically given as a reason for job search?
A)Workers are heterogeneous
B)Information is imperfect
C)Firms' compensation packages differ from one another
D)Firms are homogeneous
Q3) An unanticipated reduction in the rate of inflation is expected to:
A)reduce the unemployment rate in the short run,but not in the long run
B)reduce the unemployment rate in the both the short run and the long run
C)increase the unemployment rate in the short run,but not in the long run
D)have very little impact on the unemployment rate in either the short run or the long run
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Chapter 16: The Distribution of Personal Earnings
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Q1) If an increase in the minimum wage increases the earnings of low-income individuals relative to high-income individuals,this will cause the Lorenz curve of earnings to shift from:
A)A to B and the Gini coefficient will rise
B)A to B and the Gini coefficient will fall
C)B to A and the Gini coefficient will rise
D)B to A and the Gini coefficient will fall
Q2) If an increase in the sales tax reduces the earnings of low-income individuals relative to high-income individuals:
A)the Gini coefficient would fall
B)the Gini coefficient would rise
C)the Gini coefficient would not change
D)the Lorenz curve would shift closer to the diagonal
Q3) Which of the following is a true statement regarding the U.S.earnings distribution?
A)Because the distribution is skewed to the right,the mean exceeds the mode
B)Because the distribution is skewed to the right,the mode exceeds the mean
C)Because the distribution is skewed to the left,the mean exceeds the mode
D)Because the distribution is skewed to the left,the mode exceeds the median
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Chapter 17: Labor Productivity: Wages,Prices,and Employment
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Q1) Which of the following is one of the reasons typically given for the relatively high secular growth rate of productivity for the period 1959 - 2006?
A)A three-fold increase in the capital stock
B)An increase in service sector output relative to the manufacturing sector
C)An increase in the average length of the workweek
D)An increase in the use of quotas and tariffs to protect domestic industries
Q2) For the 1948 - 2011 period in the U.S.,the rate of productivity growth in years of declining real output was:
A)negative
B)positive
C)faster than in years of expanding real output
D)slower than in years of expanding real output
Q3) Suppose productivity stood at 5.00 in year 1,and 5.25 in year 2.If year 1 is the base year,the productivity index for year 2 is:
A)0.25
B)5
C)105
D)125
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Chapter 18: Employment and Unemployment
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Sample Questions
Q1) What is the official unemployment rate in Littleville?
A)400/1000
B)50/650
C)50/600
D)65/650
Q2) The unemployment rate for:
A)blue-collar workers is substantially higher than for white-collar workers
B)females is about double that for males
C)teenagers is about 25% higher than for those age 20 and over
D)African Americans is about four times that of whites
Q3) Which one of the following government policies would most likely be used to reduce structural unemployment?
A)Job matching programs
B)Expansionary fiscal policy
C)Job training and retraining programs
D)Expansionary monetary policy
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