Employment and Labor Law (Economics-focus)
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Course Introduction
This course provides an in-depth examination of employment and labor law with a focus on economic principles and their implications for labor markets. Students will analyze the legal framework governing employer-employee relations, collective bargaining, workplace discrimination, wage and hour regulations, and occupational safety standards. The course emphasizes how labor laws influence labor supply and demand, wage determination, employment contracts, and overall economic efficiency. Through case studies and economic models, students will explore the effects of legal policies on both workers and firms, preparing them for roles in policy analysis, human resources, and labor economics.
Recommended Textbook
Modern Labor Economics Theory and Public Policy 12th Edition by Ronald G. Ehrenberg
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Chapter 1: Introduction
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Q1) A buyer values a good at $60 while the good costs a seller $50 to make and sell.The good is sold for a price of $55.Making the good results in pollution that harms people not directly involved in the transaction.When will this transaction result in a market failure?
A) Only when the cost of the pollution exceeds $10.
B) When the pollution has any cost.
C) Only when the cost of pollution exceeds $5.
D) Only when the cost of pollution exceeds $60.
Answer: A
Q2) An economic model based in positive economics should be judged
A) by the quality and quantity of its underlying assumptions.
B) by its ability to accurately capture and describe the many complex details of the real economy.
C) by the accuracy of its predictions rather than by the accuracy of its assumptions. D) on its ability to incorporate the idiosyncratic factors that typically characterize human interactions.
Answer: C
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Chapter 2: Overview of the Labor Market
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Q1) If every worker wants ten dollars more per hour to work,then wages will
A) go up by $10.
B) go up by more than $10.
C) go up by less than $10.
D) go down as employment falls.
Answer: C
Q2) "Police persons are finding more lucrative and diverse alternative careers in the private sector." If this statement is true,then the supply curve of labor to policing will likely shift ________ and become ________ steep.Select the best pair of answers.
A) left; less
B) left; more
C) right; more
D) right; less
Answer: A
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Chapter 3: The Demand for Labor
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Q1) For two substitutes in production,if the scale effect dominates,
A) then the inputs are gross complements.
B) then the inputs are gross substitutes.
C) then the inputs could be either gross complements or gross substitutes.
D) then the inputs cannot be used at the same time.
Answer: A
Q2) For two substitutes in production,if the substitution effect dominates,
A) then the inputs are gross complements.
B) then the inputs are gross substitutes.
C) then the inputs could be either gross complements or gross substitutes.
D) then the inputs cannot be used at the same time.
Answer: B
Q3) If the firm hires to a point where the marginal expense of labor is greater than the marginal revenue product of labor,then
A) profits could be increased by increasing employment.
B) profits could be increased by reducing employment.
C) profits are maximized.
D) total cost must be greater than total revenue.
Answer: B
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Page 5
Chapter 4: Labor Demand Elasticities
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Q1) How is the own-wage elasticity of labor demand for unskilled workers affected by the elasticity of supply of other factors of production (such as skilled labor and capital equipment)? Explain.
Q2) The introduction of new forms of capital generally
A) decreases the own-wage elasticity of labor demand.
B) increases the bargaining power of unions.
C) increases the own-wage elasticity of labor demand.
D) shifts the labor demand curve to the right.
Q3) Other things equal,which of the following will have the most elastic own-wage elasticity of demand?
A) A steel firm with one plant in California.
B) All steel firms in California.
C) All steel firms in the United States.
D) All steel firms in the world.
Q4) Employment often increases after an increase in the minimum wage because
A) more people want to work at the new, higher wage.
B) independently, labor demand increases significantly at the same time.
C) the minimum wage is below the equilibrium level of wages.
D) the labor supply curve is vertical.
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Chapter 5: Frictions in the Labor Market
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Q1) A quasi-fixed cost of labor is a cost that A) is expected to change over time.
B) is proportional to the number of hours worked.
C) is proportional to the number of workers hired.
D) is proportional to the amount of capital used.
Q2) Legislation requiring employer-provided health insurance for part-time workers would probably ________ the employment of part-time workers and ________ the overtime of full-time workers.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q3) If workers share in the cost of training but also share in the productivity payoff from the training,then we expect that
A) quit rates will be lower.
B) quit rates will be higher.
C) layoff rates will be higher.
D) employers would have no incentive to hire such workers in the first place.
Q4) What is the overtime pay premium? Discuss its origin and who it covers.
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Chapter 6: Supply of Labor to the Economy: The Decision to Work
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Q1) A worker is indifferent between job one lasting 4 hours a day,job two lasting 8 hours a day,and job three lasting 12 hours a day.Job two pays $10 an hour and tangency between the indifference curve and the budget constraint occurs at 8 hours.One can conclude that
A) job one pays less per day but more per hour.
B) job three pays more per day and more per hour.
C) both A and B are true.
D) neither A nor B is true.
Q2) "When a worker's wage rate changes,there are two opposing effects-an income effect and a substitution effect." Explain the meaning of the quote.
Q3) A country has no welfare program.Then it introduces the following program: everyone gets $4000 if they work more than 1000 hours a year (on top of what they earn).The effect of this event will be to ________ the labor force participation and the effect of this event on those who were working more than 1000 hours will be to ________ hours of work.
A) increase, increase
B) decrease, increase
C) increase, decrease
D) decrease, decrease
Page 8
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Chapter 7: Labor Supply: Household Production, the Family, and
the Life Cycle
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Q1) The government raises taxes on wages by 20% and splits the money evenly across households as "free money" such that the average household gets back what it paid extra in taxes.In a household where the dollars collected by the 20% added tax initially equals the dollars received as free money,their work hours are likely to A) increase.
B) decrease.
C) increase if the income effect dominates the substation effect.
D) remain unchanged.
Q2) If the decision-making process in a household is by partners bargaining with each other,then which of the following would we expect to see (compared to a household where one of the partners makes all the decisions)?
A) One of the partners is likely to drop out of the labor market and stay at home.
B) Women with fewer economic resources are likely to be better treated by their husband.
C) Holding household income constant, expenditure patterns will usually favor the partner making the most income.
D) No differences between these two types of households.
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Page 9
Chapter 8: Compensating Wage Differentials and Labor
Markets
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Q1) On a graph of wage rates versus risk of injury,indifference curves are convex because
A) risk of injury decreases workers' utility.
B) each additional dollar of pay increases utility more than the previous dollar.
C) utility is constant on indifference curves.
D) at low levels of risk, a worker is less willing to give up wages for increased safety.
Q2) Employers make contributions to pension funds on behalf of employees.In many instances,however,a worker is not entitled to collect from the pension unless she has worked for the firm a minimum number of years.Once the worker has worked the necessary number of years to be eligible to collect from the pension fund,the worker is said to be vested in the pension fund.A governmentally mandated change in vesting to make all workers become fully vested sooner would
A) increase utility of all workers.
B) increase utility of workers who plan to stay with a company for the length of their time in the labor force.
C) probably cause firms affected by the legislation to decrease wages.
D) probably cause firms not affected by the legislation to increase wages.
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Chapter 9: Investments in Human Capital: Education and Training
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Q1) Which of the following would likely,in the long run,reduce the observed rate of return from going to college?
A) Funds available to support college students become less available.
B) People going to college start to work longer hours.
C) Earnings of high school graduates decrease.
D) Educational reforms cause going to college to be fun and enjoyable.
Q2) Students who attend college because they enjoy the lifestyle and freedom are treating college
A) as an investment good.
B) as an inferior good.
C) as a consumption good.
D) as a normal good.
Q3) A college education for Bill,using the market rate of interest of 5%,has a net present value of $50,000.Which of the following is an internal rate of return consistent with this present value?
A) 4%
B) 5%
C) 6%
D) -5%
11
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Chapter 10: Worker Mobility: Migration, Immigration, and Turnover
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Q1) For workers who emigrate to the United States from a country with a less equal distribution of earnings,
A) the largest potential gain exists for unskilled workers.
B) the largest potential gain exists for skilled workers.
C) immigrants will be positively selected with respect to skills.
D) immigrants will, on average, have a higher skill level than the workers who do not emigrate.
Q2) An increase in the number of immigrants causes
A) the labor demand curve to shift to the left.
B) the labor supply curve to shift to the left.
C) the labor supply curve to shift to the right.
D) the labor demand curve to become flatter.
Q3) Suppose that an influx of relatively unskilled immigrant labor occurs.What is the effect of the influx of immigrant labor on the labor market for more skilled native workers?
Q4) An increase in his or her expected career length will make a worker
A) more likely to change jobs.
B) less likely to change jobs.
C) exactly as likely to change jobs.
D) either more or less likely to change jobs.
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Chapter 11: Pay and Productivity: Wage Determination
within the Firm
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Q1) Discuss the concept of an implicit contract in the context of employment.
Q2) A self-enforcing contract requires that
A) employees gain from opportunistic behavior.
B) one party receives the entire surplus.
C) both employees and employers lose by discontinuing their contract.
D) the surplus be divided equally.
Q3) Students in a 100 person class agree beforehand to answer all 20 multiple choice questions with B.Under which of these grading methods is this likely to prove an effective agreement that does not produce cheating on the agreement (for example,by a few students answering the questions correctly)?
A) The professor gives the top five papers a 100, the next five best an 80, and the rest a 50.
B) The professor gives the highest score a grade of 100 and starts reducing scores by 5 points for every one wrong.
C) The professor subtracts 5 points from 100 for every question wrong.
D) The best paper gets an A, the rest an F.
Q4) Identify and discuss the two general problems that output-based pay schemes suffer from.
Q5) What is the firm-size effect? What accounts for the firm-size effect?
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Chapter 12: Gender,Race,and Ethnicity in the Labor Market
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Q1) Comparable worth analysis in Minnesota found that
A) measured worth of most jobs was completely unrelated to pay.
B) a regression of measured worth versus pay yielded a horizontal line.
C) jobs with higher measured worth received higher pay.
D) jobs with higher measured worth received lower pay.
Q2) Actual efforts to identify wage discrimination by gender in the labor market
A) provide conclusive proof that wage discrimination against women exists and reduces their wages by about 10%.
B) provide conclusive proof that wage discrimination against women exists and reduces their wages by about 20%.
C) cannot prove the existence of wage discrimination because some important unmeasurable characteristics differ by gender.
D) cannot prove the existence of wage discrimination because some important measurable characteristics differ by gender.
Q3) Comparable worth
A) sets salaries in the most efficient manner possible.
B) implies that all professions are underpaid.
C) ignores market conditions.
D) depends on supply and demand factors.
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Page 14
Chapter 13: Unions and the Labor Market
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Q1) Suppose all textile workers in the United States formed a union.Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs)?
A) Labor costs represent a large share of textile production costs.
B) Textile firms will not invest in capital substituting for labor in producing textiles because textiles is a declining industry.
C) Labor is a good substitute for capital.
D) Textile buyers consider U.S. textiles a good substitute for non-U.S. made textiles.
Q2) Suppose a study finds that union wages are 10% higher than nonunion wages.This will likely overstate the true advantage of working in the union job when
A) the nonunion job has better skilled workers.
B) the union job has poorer working conditions.
C) workers losing union jobs seek out non-union jobs.
D) unemployment is high.
Q3) Do unions increase worker productivity?
Q4) What is the union relative wage advantage? What is the estimated value of the union relative wage advantage?
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Page 15
Chapter 14: Unemployment
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Q1) Theoretically,existence of generous unemployment insurance will
A) reduce the unemployment rate.
B) reduce reservation wages.
C) improve job matches.
D) increase income inequality.
Q2) The largest source of unemployed workers is ________ and the second largest is ________.
A) job losers; new entrants
B) job losers; reentrants
C) job leavers; new entrants
D) job leavers; reentrants
Q3) An increase in an individual's reservation wage
A) will increase the duration of the individual's unemployment but not affect the expected wage.
B) will increase the individual's expected wage but not affect the duration of unemployment.
C) will not change the individual's duration of unemployment.
D) will increase both the individual's duration of unemployment and expected wage.
Q4) Does the unemployment insurance payroll tax encourage layoffs? Why or why not?
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Chapter 15: Inequality in Earnings
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Q1) The earnings and employment of those with more human capital have both increased dramatically since 1980.This suggests that their ________ curve had shifted
A) demand; leftward
B) demand; rightward
C) supply; leftward
D) supply; rightward
Q2) Much of the recent growth in income inequality was caused by
A) increases in real earnings of high school graduates.
B) decreasing returns to experience.
C) increases in the number of part-time workers.
D) increasing returns to education.
Q3) The increase in wage inequality has been more rapid in the United States than in other industrialized countries for all the following reasons EXCEPT
A) the supply of skilled workers has grown less quickly in the United States.
B) wage determination is more decentralized in the United States.
C) unskilled workers are retrained more quickly in the United States.
D) unemployment rates among unskilled workers have risen more rapidly in other countries.
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Page 17
Chapter 16: The Labor-Market Effects of International Trade and
Production Sharing
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Q1) Nation X's major agricultural product before trade is wheat.Nation X will be potentially better off from open trade if the world price of wheat is ________ its pre-trade price of wheat.
A) above
B) below
C) above or below
D) the same as
Q2) Mr.X is a total loser.He is worse at doing everything than anyone else.According to the law of comparative advantage,
A) he will not be able to compete with others and will remain unemployed.
B) others will be worse off dealing with Mr. X as he is comparatively inferior.
C) he will be able to get a job but at such a low wage that he will be, on net, worse off.
D) he will be able to compete with others by doing what he is comparatively less worse at.
Q3) How does a country's move toward greater international trade affect labor demand through shifts in product market demand?
Q4) What is the substitution effect on American labor when lower wage labor becomes available in the rest of the world?
Page 18
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