Labor Economics
Chapter Exam Questions
Course Introduction
Labor Economics is the study of how labor markets function, focusing on the dynamics between employers and employees and the factors that influence the supply and demand for labor. This course explores topics such as wage determination, employment and unemployment, labor market equilibrium, human capital investment, and the impact of government policies on labor markets. Students will analyze real-world labor market issues using microeconomic and macroeconomic theories, and examine empirical research relevant to wage inequality, labor mobility, unions, discrimination, and labor market regulations. The course aims to develop an understanding of how labor markets affect individuals, businesses, and the overall economy.
Recommended Textbook Microeconomics 2nd Edition by Daron Acemoglu
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Chapter 1: The Principles and Practice of Economics
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Sample Questions
Q1) A consumer has $50 to spend.He has to decide between buying two goods: magazines priced at $5 each and DVDs priced at $10 each.Which of the following combinations of the two goods will entirely exhaust his budget constraint?
A) 3 magazines and 4 DVDs
B) 2 magazines and 4 DVDs
C) 6 magazines and 1 DVD
D) 2 magazines and 2 DVDs
Answer: B
Q2) Which of the following statements correctly differentiates between positive and normative economics?
A) Positive economics is descriptive, whereas normative economics is advisory.
B) Positive economics describes what people ought to do, whereas normative economics describes what people actually do.
C) Positive economics is based on judgments, whereas normative economics is not.
D) Positive economics can only be applied to microeconomics, whereas normative economics can be applied to both microeconomics and macroeconomics.
Answer: A
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Chapter 2: Economic Methods and Economic Questions
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Sample Questions
Q1) Which of the following is a property of a good economic question?
A) A good economic question can be answered.
B) A good economic question should always have a single solution.
C) A good economic question always addresses topics that are important to the whole society and not to an individual economic agent.
D) A good economic question should never incorporate elements from disciplines other than economics.
Answer: A
Q2) Which of the following is a feature of the scientific method?
A) The scientific method is not based on data, statistics, or measurements.
B) The scientific method allows improvisation and correction of inconsistent models.
C) The scientific method enables the creation of perfectly accurate models of the real world.
D) The scientific method is used only for studying topics related to economics.
Answer: B
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Chapter 3: Optimization: Doing the Best You Can
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Sample Questions
Q1) Refer to the scenario above.For which of the following choices is the marginal total cost the lowest?
A) Choosing factory Close over factory Far
B) Choosing factory Far over factory Very Far
C) Choosing factory Very Close over factory Close
D) Choosing factory Close over factory Very Far
Answer: B
Q2) The analysis of how a customer's taste for cars will change when her wealth triples falls under the scope of ________.
A) normative analysis
B) marginal research
C) cost-benefit analysis
D) before and after comparisons
Answer: D
Q3) Net benefits of an alternative equal ________.
A) benefits minus costs
B) benefits divided by costs
C) the sum of benefits and costs
D) the product of benefits and costs
Answer: A
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Chapter 4: Demand, supply, and Equilibrium
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Q1) At a price of $1 per table,the quantity supplied of tables is 100 units,whereas the quantity demanded is 70 units.Given this information,which of the following statements is true?
A) The equilibrium price is $1 per table.
B) The market clearing price is $1 per table.
C) At a price of $1 per table, there is a surplus in the market.
D) At a price of $1 per table, there is a shortage in the market.
Q2) Differentiate between a change in demand and a change in quantity demanded.
Q3) Refer to the table above.From 2000 to 2001,opium sales fell by 95 percent and opium prices increased by 975 percent.If you are told that demand curve for opium in Afghanistan remained constant from 2000 to 2001,what was the likely change in opium supply?
A) Increase in only quantity supplied
B) Decrease in only quantity supplied
C) Increase in supply
D) Decrease in supply
Q4) Define marginal cost.Is it different from the concept of willingness to accept?
Q5) What will happen to the equilibrium price and quantity of cars if there is an increase in the price of gasoline?
Q6) Explain the role of prices in a market.
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Chapter 5: Consumers and Incentives
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Sample Questions
Q1) Consumer surplus is ________.
A) the difference between the willingness to pay for a good and the price paid for the good
B) the sum of the willingness to pay for a good and the price paid for the good
C) the product of the willingness to pay for a good and the price paid for the good
D) the ratio of the willingness to pay for a good to the price paid for the good
Q2) As the number of substitutes available for a good increases,the price elasticity of demand for the good ________.
A) initially increases and then decreases
B) initially decreases and then increases
C) decreases
D) increases
Q3) Your budget set contains ________.
A) only those bundles of jeans and sweaters that exhaust less than all your income
B) all bundles of jeans and sweaters that are affordable with your income
C) all bundles of jeans and sweaters that exhaust all your income
D) all bundles of jeans that are not affordable with your income
Q4) What are the factors that determine a buyer's purchasing decision?
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Chapter 6: Sellers and Incentives
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Sample Questions
Q1) Refer to the scenario above.If Jenna wants to make 500 pastries per week,which level of capital input should she choose?
A) Spatula mixer
B) Hand mixer
C) Stand mixer
D) Any of the three mixers
Q2) A firm should shut down in the short run if the price of a good is less than its ________.
A) average fixed cost
B) average total cost
C) average variable cost
D) marginal cost
Q3) Marginal cost is the change in the ________.
A) total cost associated with producing one more unit of output
B) average total cost associated with producing one more unit of output
C) average variable cost associated with producing one more unit of output
D) opportunity cost associated with producing one more unit of output
Q4) Are the terms "shutdown" and "exit" synonymous? What is the optimal shutdown rule for a firm?
Q5) Is it possible for an input to have a negative marginal product?
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Chapter 7: Perfect Competition and the Invisible Hand
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Sample Questions
Q1) Refer to the figure above.Which of the following statements is true?
A) Firm A produces at a lower marginal cost.
B) For a particular market price, Firm A will enjoy a greater producer surplus.
C) Firm B will have a higher reservation value than Firm A.
D) The profit-maximizing level of output of Firm B will be greater than that of Firm A at all prices.
Q2) The reservation value of a seller reflects her ________.
A) willingness to pay for using a resource
B) marginal cost
C) marginal revenue
D) total cost
Q3) Refer to the figure above.Suppose the price in this market is $3.We expect ________.
A) the firms to start exiting this market
B) the firms start entering this market
C) no entry or exit in this market
D) exit from this market, followed by entry of firms into this market
Q4) What is the economic variable that guides the invisible hand?
Q5) What are price controls? How do they affect a market?
Q6) What does the concept of the invisible hand imply?
Page 9
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Chapter 8: Trade
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Sample Questions
Q1) Refer to the scenario above.Davis has a ________ opportunity cost of doing math homework assignments and a ________ opportunity cost of writing English essays compared to Viola.
A) lower; higher
B) higher; higher
C) lower; lower
D) higher; lower
Q2) What are the effects of a tariff on a good on various groups and on the total surplus in the country that imposes the tariff?
Q3) Refer to the figure above.Which of the following combinations is attainable as well as efficient?
A) B
B) C
C) D
D) E
Q4) Refer to the figure above.Which of the following combinations is unattainable?
A) A
B) B
C) D
D) E
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Chapter 9: Externalities and Public Goods
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Sample Questions
Q1) An economic agent ________ when he accounts for the full costs and benefits of his actions.
A) is called a free rider
B) internalizes an externality
C) maximizes his profit
D) is called a rent seeker
Q2) Rides in a public park are ________ in consumption.
A) non-excludable and non-rival
B) excludable but non-rival
C) excludable and rival
D) non-excludable but rival
Q3) Which of the following is not an example of the tragedy of the commons?
A) Extracting water extraction from aquifers
B) Cutting trees on public land
C) Fishing on a private lake
D) Eating from the office donut box
Q4) What causes the overexploitation and depletion of common pool resource goods?
Q5) How is the market demand curve for a public good derived?
Q6) Why does the presence of negative externalities in the production of a good lead to an overproduction of the good?
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Chapter 10: The Government in the Economy: Taxation and Regulation
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Sample Questions
Q1) Refer to the scenario above.The federal government imposes a tax of $10 per video game that is collected from consumers (demanders).After the tax,consumers pay ________ per video game,suppliers receive ________ per video game,and ________ thousand video games are traded in the market.Explain your answers with a graph.
A) $60; $50; 50
B) $50; $40; 50
C) $45; $35; 40
D) $55; $45; 45
Q2) Joseph earns $75,000.If his average tax rate is 18 percent,what is the total amount of money that he pays in tax?
A) $1,500
B) $13,500
C) $2,700
D) $15,000
Q3) Refer to the figure above.The after-tax social surplus is ________.
A) Regions 1 and 4
B) Regions 2 and 3
C) Regions 1,2, 3, and 4
D) Regions 1, 2, 3, 4, and 5
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Chapter 11: Markets for Factors of Production
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Q1) Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $11.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.
A) 3
B) 4
C) 5
D) 6
Q2) Refer to the scenario above.If the hourly wage increases from $1.00 to $1.60,Paul would choose to work ________.
A) more hours
B) the same number of hours
C) fewer hours
D) as much as he can (8 hours)
Q3) Given that the market wage rate is $50 and both the labor and the goods market are perfectly competitive,a profit-maximizing firm should hire an additional worker if
A) the marginal product of the worker is 50 units
B) the value of the marginal product of the worker is at least $50
C) the marginal product of the worker is less than 50 units
D) the value of the marginal product of the worker is less than $50
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Chapter 12: Monopoly
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Sample Questions
Q1) Greenaqua Corp.was given the exclusive right to produce and sell its newly introduced water purifier for 20 years.The right granted to Greenaqua is an example of a
A) patent
B) blueprint
C) copyright
D) trademark
Q2) Which of the following is an example of legal market power?
A) A patent
B) The presence of a network externality
C) Control of a key resource
D) Economies of scale
Q3) Sellers in ________ are likely to have the highest market power.
A) a monopoly
B) an oligopoly
C) perfect competition
D) monopolistic competition
Q4) A monopoly produces and sells 300 units of its product for $8 per unit.If the total cost incurred by the monopoly is $1,800,determine its profit or loss.
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Chapter 13: Game Theory and Strategic Play
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Sample Questions
Q1) Two friends,Pat and Julie,are going to a concert.They play a simple game in which they hold out one or two fingers to decide who will pay for the other's ticket.Pat wins if the fingers held out add up to an even number; Julie wins if the fingers held out add up to an odd number.The price of the ticket is $9.
a)Construct a payoff matrix for the game.
b)Is there a unique Nash equilibrium in this game?
c)Which strategy should a player use to maximize her chances of winning the game?
Q2) Refer to the scenario above.If a > 3,then ________.
A) low effort by Jim and high effort by Janis form a Nash equilibrium
B) high effort by Jim and low effort by Janis form a Nash equilibrium.
C) low effort by Jim and low effort by Janis form a Nash equilibrium
D) no pair of effort levels forms a Nash equilibrium
Q3) Refer to the scenario above.In equilibrium,________.
A) both firms will offer a discount
B) neither firm will offer a discount
C) Firm 1 will offer a discount, while Firm 2 will not offer a discount
D) Firm 1 will continue charging the original price, while Firm 2 will offer a discount
Q4) What is a zero-sum game? Explain with an example.
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Chapter 14: Oligopoly and Monopolistic Competition
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Q1) Refer to the scenario above.A firm producing Good Y will continue production in the short run if total revenue exceeds ________.
A) $25,000
B) $60,000
C) $85,000
D) $35,000
Q2) Differentiate between the four market structures on the basis of the type of products sold.
Q3) An oligopoly model in which sellers compete on quantities rather than prices is called the ________ model.
A) Bertrand
B) Cournot
C) Pareto
D) Pigouvian
Q4) Differentiate between oligopoly and monopolistic competition on the basis of the number of firms and the degree of product differentiation.
Q5) Is there any similarity between a monopoly and a monopolistically competitive firm in the long run? Explain your answer.
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Chapter 15: Trade-Offs Involving Time and Risk
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Q1) An individual receives $100 if the outcome of a coin toss is heads.If the outcome of the coin toss is tails,he loses $50.If the individual weights future losses by a special factor of 2,what is the psychological value of this coin toss?
Q2) Refer to the scenario above.The principal in this case is ________.
A) $300
B) $1,000
C) $1,300
D) $2,300
Q3) Refer to the scenario above.The total value in your account at the end of a year is equal to ________.
A) $520
B) $525
C) $550.50
D) $572
Q4) If the market rate of interest is 8 percent per year,what is the present value of $10,000 to be received for the following periods?
a)After 5 years
b)After 10 years
Q5) What are the different categories of risk preferences? Explain.
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Chapter 16: The Economics of Information
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Q1) Employees at La Dola Inc.often engaged in hasty decision making that resulted in losses for the company.Because employees were not individually accountable for their decisions,this trend continued.However,when the company introduced a profit-sharing policy for its employees,they began scrutinizing their decisions carefully before implementing them.Explain the reason for the change in employees' behavior.
Q2) ________ discourage low-risk individuals from seeking health insurance.
A) Low premiums
B) High premiums
C) High costs of medical treatment
D) Low interest rates
Q3) The probability of being detected after committing a murder in Richland is 0.8,and if detected,the murderer is imprisoned for a minimum of 10 years.What is the expected punishment in this case?
A) 2 years
B) 8 years
C) 12 years
D) 10 years
Q4) Why do the owners of good-quality used cars stay away from the market for used cars?
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Chapter 17: Auctions and Bargaining
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Q1) In an English auction,the winner pays a price equal to ________.
A) the value of the highest bid
B) the value of the lowest bid
C) his value for the good
D) the value of the second-highest bid
Q2) Refer to the scenario above.Tom should submit a bid of ________.
A) $150
B) $250
C) $112.50
D) $200
Q3) In a goods market,sellers have a higher bargaining power if ________.
A) the good being traded has close substitutes
B) there are several firms in the industry
C) there are just a few firms in the industry
D) there are just a few buyers in the market
Q4) In an English auction,the ________ bidder wins.
A) highest
B) second-highest
C) first
D) second
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Chapter 18: Social Economics
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Sample Questions
Q1) You are on a vacation in a foreign country.Because it is your first visit to the country,you do not know much about the tourist spots.Therefore,you decide to ask the manager of the hotel about popular tourist places.He tells you that there is a waterfall and a beautiful park close to the hotel that you can visit.You are wondering which place to go to when you overhear some of the tourists planning a trek to one of the falls.You decide to join them.This is an example of ________.
A) moral hazard
B) adverse selection
C) a pecuniary externality
D) an information cascade
Q2) An information cascade occurs when ________.
A) the buyer of a good has more information than the seller and takes hidden actions
B) the seller of a good has more information about the hidden characteristics of the good than the buyer
C) people make the same decisions as others without focusing on private information
D) people have contradictory information about a good they want to consume
Q3) Differentiate between the two types of altruism.
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