Labor Market Analysis
Exam Practice Tests
Course Introduction
Labor Market Analysis explores the fundamental principles and tools used to understand how labor markets operate, including supply and demand for labor, wage determination, employment trends, and the impact of government policies. This course examines both microeconomic and macroeconomic perspectives on labor markets, considering factors such as human capital, labor mobility, discrimination, and technological change. Students will learn to analyze statistical data, interpret labor market indicators, and employ quantitative methods to assess issues such as unemployment, labor force participation, and income inequality, preparing them to evaluate current labor market challenges and policy debates.
Recommended Textbook
Labor Economics 6th Edition by George
J. Borjas
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12 Chapters
360 Verified Questions
360 Flashcards
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Page 2
Chapter 1: Introduction to Labor Economics
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Sample Questions
Q1) The government is a player in the U.S.labor market in part because the government
A)determines who can go to college.
B)assigns potential workers to particular industries.
C)sets workplace worker safety regulations.
D)suggests a minimum wage for firms to pay.
E)funds employer-based health insurance benefits.
Answer: C
Q2) The labor supply curve shows how many workers are willing to work
A)in a particular industry.
B)at any given time.
C)at the minimum wage.
D)at any given wage.
E)in order to maximize the firm's profit.
Answer: D
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Chapter 2: Labor Supply
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Sample Questions
Q1) According to the substitution effect, an increase in the wage rate will lead the worker to
A)work more hours if leisure is a normal good.
B)work more hours if leisure is an inferior good.
C)work fewer hours if leisure is a normal good.
D)work fewer hours if leisure is an inferior good.
E)work more hours regardless of whether leisure is normal or inferior.
Answer: E
Q2) Prior to an expanded child care subsidy program in Illinois, the labor force participation rate of single mothers in Illinois was 45% and in Wisconsin was 48%.After Illinois expanded its child care subsidy program, the participation rate increased to 58% in Illinois and to 51% in Wisconsin.The expanded child care program in Illinois is estimated to increase labor force participation of single mothers by how much according to a difference-in-differences estimator?
A)3%
B)6%
C)7%
D)10%
E)13%
Answer: D
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Page 4
Chapter 3: Labor Demand
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Sample Questions
Q1) What is not true when thinking of the firm's objective as a cost-minimization problem rather than as a profit-maximization problem?
A)The slope at any point on any isoquant reveals the marginal rate of technical substitution.
B)The firm chooses labor and capital to minimize its costs.
C)The firm chooses a particular level of output to produce.
D)The price of the output good never enters the decision as to how much labor or capital to employ.
E)The firm will choose labor and capital inputs so that the marginal productivity of labor relative to the marginal productivity of capital equals the price of labor relative to the price of capital.
Answer: B
Q2) The production function relates
A)factor prices to output prices.
B)wages to labor employed.
C)factors of production to total output.
D)factors of production to profit.
E)the output price to factors of production.
Answer: C
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Page 5
Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) If immigrant workers are complementary to native workers, then
A)native workers will be better off with open borders.
B)immigrant workers will receive a higher wage than native workers.
C)immigration will shift the demand for native labor to the left.
D)there will be no immigration surplus.
E)each firm will hire only immigrants or only natives but not a mixture of the two.
Q2) Which of the following does not describe a perfectly discriminating monopsonist?
A)The firm hires different workers at different wages.
B)The firm hires workers to the point where the labor supply curve intersects the firm's labor demand curve.
C)The firm's marginal cost of labor equals the labor supply curve faced by the firm.
D)The firm uses fewer hours of labor than it would if it were in a competitive market.
E)The wage-labor outcome is efficient.
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Chapter 5: Compensating Wage Differentials
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Sample Questions
Q1) When the government imposes safety regulations on a particular job or labor market, what is most likely to happen?
A)Wages will increase.
B)Utility will increase if workers are able to correctly evaluate working conditions.
C)Wages will fall but utility will increase if workers misperceive on-the-job risk.
D)Employment will increase.
E)Firms that used to offer bad working conditions will be required to shut down.
Q2) The correlation between wages and the probability of encountering a fatal injury while on the jobs can be used to calculate:
A)the value of risk.
B)the value of safety.
C)the value of life.
D)the value of injury.
E)the value of work.
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Chapter 6: Human Capital
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Sample Questions
Q1) If ability is positively related to schooling, then estimating the returns to education directly from the wage-schooling profile will likely
A)under-estimate the return to schooling.
B)over-estimate the return to schooling.
C)under-estimate the average wage.
D)over-estimate the average wage.
E)under-estimate the average discount rate.
Q2) What is the stopping rule for choosing one's years of schooling?
A)End one's schooling when the return from more schooling is zero.
B)End one's schooling when the cost of one more year of schooling is zero.
C)End one's schooling after college.
D)End one's schooling when the rate of return to one more year of schooling equals the worker's rate of discount.
E)End one's schooling when the worker's rate of discount equals zero.
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8
Chapter 7: The Wage Structure
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Sample Questions
Q1) All but which one of the following statements about the Gini coefficient is true?
A)The Gini coefficient reflects the data shown in the Lorenz curve.
B)The Gini coefficient equals zero when there is perfect equality.
C)The Gini coefficient increases as income inequality increases.
D)The Gini coefficient must fall when the amount of income in an economy increases.
E)The Gini coefficient equals one when there is perfect inequality.
Q2) Expansions in globalization and the reduction of trade barriers world-wide during the 1980s and 1990s most likely had what effect on the demand for U.S.labor?
A)The demand for unskilled workers increased, while the demand for skilled workers decreased.
B)The demand for unskilled workers decreased, while the demand for skilled workers increased.
C)The demand for unskilled and skilled workers increased.
D)The demand for unskilled and skilled workers decreased.
E)The demand for unskilled workers increased, while the demand for skilled workers didn't change.
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9
Chapter 8: Labor Mobility
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Sample Questions
Q1) Which of the following is true?
A)A person might choose to not move because their family is better off by not moving, even though the person would individually be better off by moving.
B)A family will move even though as a unit they are better off staying, as long as at least one member of the family is made better off by moving.
C)When a family migrates, there may be both tied movers and tied stayers in the family.
D)A repeat mover must have made a mistake in the initial move.
E)Cultural assimilation is not included in migration costs.
Q2) Suppose an economy exhibits general conditions of downward sloping labor demand, upward sloping supplies of domestic and immigrant labor, and a competitive labor market.Which of the following is not a likely outcome of immigration?
A)Domestic workers will experience some job losses.
B)Domestic workers who keep their job will experience an increase in earnings.
C)The market clearing wage will fall.
D)Economic surplus will increase in the destination country, even net of immigrant earnings.
E)Some economic surplus will transfer from domestic workers to domestic firms.
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Page 10
Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) One possible measure of gender discrimination is to look at the difference between the average male wage and the average female wage.This is a poor measure of discrimination for all of the following reasons except:
A)Men and women might have different preferences when it comes to supplying labor.
B)Men and women may differ in the return they receive for their skills.
C)Men and women may differ in their overall level of skill.
D)Men and women may differ in their taste for part-time jobs.
E)Men and women may differ in their willingness to accept risky jobs.
Q2) Suppose the value of marginal product is $20 per hour regardless of race.An employer who faces an hourly wage of $14 per black worker and $17 per white worker decides to hire all white workers.What kind of discrimination is this?
A)Employee discrimination.
B)Consumer discrimination.
C)Employer discrimination.
D)Statistical discrimination.
E)None of the above.
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11
Chapter 10: Labor Unions
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Sample Questions
Q1) Which of the following is least associated with union jobs and contracts?
A)High-skilled workers.
B)A large population of black workers.
C)A large population of immigrant workers.
D)Both private and public sectors jobs.
E)Jobs in industries that are controlled by just a few firms.
Q2) Which statement best describes international comparisons of unionization rates?
A)Private sector unionization is about the same (around 20%) in all developed countries.
B)Private sector unionization is greater in less-developed countries than in developed countries.
C)Private sector unionization rates have steadily fallen in all developed countries over the last 40 years.
D)Private sector unionization rates vary greatly by country.
E)Private sector unionization rates exceed public sector unionization rates in all developed countries.
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Chapter 11: Incentive Pay
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Sample Questions
Q1) Which of the following statements is false?
A)Profit sharing redistributes profits back to the workers.
B)Bonuses are frequently linked to performance.
C)Bonuses are paid in addition to base salary.
D)Free-riding can result from a compensation scheme that gives competitive individual bonuses.
E)Free-riding can result from profit sharing.
Q2) One disadvantage of using a tournament is that
A)no one will apply for tournament-style jobs.
B)tournaments are more expensive than time rates or piece rates.
C)workers who view themselves as losing the tournament will quit providing effort.
D)the winners of tournaments are typically over-paid.
E)tournaments are not able to identify the most productive workers.
Q3) Piece rates typically
A)encourage greater effort from workers.
B)are more common than time rates.
C)are associated with the worker incurring less risk concerning one's income.
D)are more common among higher paying jobs.
E)do not reward skill.
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Page 13
Chapter 12: Unemployment
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Sample Questions
Q1) What is the best description of unemployment insurance benefits in the United States?
A)All unemployed workers receive the same benefit regardless of what their previous job was.
B)All unemployed workers receive the same wage-adjusted benefit regardless of what state they live in.
C)Unemployment benefits are based on family size and age.
D)Unemployment benefits are greater for low-wage workers than for high-wage workers.
E)Unemployment benefits are a greater percentage of previous earnings for low-wage workers than for high-wage workers.
Q2) Since 1980, unemployment rates have been _________ in Europe relative to in United States.
A)higher
B)lower
C)about the same
D)unpredictable
E)adjusting
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