Public Policy Analysis Review Questions
Course Introduction
Public Policy Analysis explores the theoretical frameworks and practical approaches used to assess, design, and evaluate public policies. The course introduces students to methodologies for analyzing policy problems, setting objectives, and identifying alternative solutions within political, economic, and institutional contexts. Emphasis is placed on understanding the policy process, stakeholder engagement, evidence-based decision making, and the tools for interpreting policy outcomes. Students develop skills in policy research, writing policy memos, and critically assessing the effectiveness and equity of public policies across sectors such as health, education, environment, and social welfare.
Recommended Textbook
Modern Labor Economics Theory and Public Policy 12th Edition by Ronald G. Ehrenberg
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768 Verified Questions
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Chapter 1: Introduction
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Sample Questions
Q1) Suppose that Rebecca is willing to work as a coffee barista for anything equal to or over $12 per hour.Java Coffee Shop (JCS)is willing to hire a new barista for anything up to $15 per hour.Which of the following arrangements is most equitable?
A) JCS hires Rebecca at $15 per hour.
B) Rebecca goes to work for JCS at $12 per hour.
C) JCS hires Rebecca for $14 per hour.
D) It is impossible to determine which arrangement is most equitable without defining a subjective standard for "fairness."
Answer: D
Q2) Which of the following will NOT prevent a mutually beneficial transaction from occurring?
A) a market where buyers and sellers have internalized all benefits and costs of their transactions
B) ignorance about availability of a service or product
C) a law against overtime work
D) a tax on labor services
Answer: A
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Chapter 2: Overview of the Labor Market
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Q1) Which of the following events will cause a surplus of workers?
A) a wage above the market-clearing wage
B) an increase in the supply of workers
C) a decrease in the demand for workers
D) more workers wanting to work at higher wages
Answer: A
Q2) If a union negotiates an industry-wide agreement to set wages above the equilibrium level,
A) the industry's demand curve for labor will shift inward.
B) there will be a surplus of labor in the industry.
C) there will be a shortage of labor in the industry.
D) there will be neither a shortage nor a surplus of labor in the industry.
Answer: B
Q3) If the price of capital increases in an industry and the scale effect dominates,
A) wages and employment levels will both increase.
B) wages and employment levels will both decrease.
C) wages will increase and employment levels will decrease.
D) wages will decrease and employment levels will increase.
Answer: B
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Page 4
Chapter 3: The Demand for Labor
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Q1) If employers are paid a subsidy of $0.75 per hour for hiring teenaged workers,then
A) the teenagers' wage rate will usually increase by less than $0.75 per hour.
B) the teenagers' wage rate will usually increase by more than $0.75 per hour.
C) the teenagers' wage rate will usually increase by exactly $0.75 per hour.
D) the teenagers' wage rate will usually decrease.
Answer: A
Q2) The marginal product of labor tells us
A) which employee is the most productive.
B) the average output produced by each employee.
C) the additional output produced by the last employee hired.
D) how much money the firm can make from hiring each employee.
Answer: C
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) A city mandates that all businesses who sell goods and services to the city must pay at least a living wage to their workers that is substantially above what low-skilled workers are currently being paid.Which of the following will result in a greater decrease in employment of low-skilled workers who were working for the affected businesses?
A) The city's demand for the services that businesses supply them is highly inelastic. B) Low-skilled workers represent a small fraction of the costs of doing business with the city.
C) Higher-skilled workers are readily available at the higher wage.
D) Low-skilled workers are complements with other inputs providing city services.
Q2) Technological progress implies that
A) everyone could be better off if gainers compensate losers. B) everyone will be better off.
C) there must be losers.
D) losers lose more than gainers gain.
Q3) Industry A has own-wage elasticity of labor demand of -2.5.Industry B has own-wage elasticity of labor demand of -0.5.Which industry is more likely to be unionized? Explain why.
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Page 6
Chapter 5: Frictions in the Labor Market
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Q1) Training costs
A) exclude opportunity costs of trainees' time.
B) arise mostly from out-of-classroom training.
C) exclude the opportunity cost of using capital equipment.
D) exclude opportunity costs of trainers' time.
Q2) A reserve clause binds a professional athlete to a sports franchise even if the player does not have a contract with the team that retains the rights to the player.In other words,the player can only play for a single team and other teams may not bid for the player's services even in the absence of a contract.Major League Baseball was forced to outlaw reserve clauses in 1975.As a result of the ban,we would expect that
A) major league teams would have less incentive to train minor league players.
B) minor league players would be paid more.
C) players in the major leagues would be paid less than their marginal product.
D) players in the major leagues would be paid more than their marginal product.
Q3) Which of the following is definitely NOT a quasi-fixed cost of labor?
A) unemployment insurance
B) health insurance
C) overtime pay
D) vacation pay
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Page 7
Chapter 6: Supply of Labor to the Economy: The Decision to Work
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Q1) On the portion of a worker's labor supply curve that is backward-bending,
A) the substitution effect outweighs the income effect.
B) the income effect outweighs the substitution effect.
C) the income effect is negative.
D) the substitution effect is negative.
Q2) Consider two workers-Averil and Taylor.They both earn the same wage rate and neither has any non-labor income.Averil chooses to work 40 hours per week and Taylor chooses to work 10 hours per week.Due to improving macroeconomic conditions both workers experience an exogenous 10% increase in their common wage rate.Explain which worker is likely to have a larger income effect as a result of the wage increase.Illustrate with the appropriate graph.
Q3) The opportunity cost of leisure
A) is the wage that one could earn by working an additional hour.
B) is the amount of income that would be necessary to hold an individual's utility level constant were they to work an additional hour (that is, give up an hour of leisure time).
C) is equivalent to the individual's non-labor income.
D) is directly related to the individual's level of leisure consumption per time period.
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Page 8
Chapter 7: Labor Supply: Household Production,
and the Life Cycle
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Q1) If the only working member of a household receives a decrease in his wage rate,then
A) he will choose to work fewer hours.
B) he will choose to work more hours.
C) he will choose to work the same number of hours.
D) he could work more, fewer, or the same number of hours as before.
Q2) If the slopes between income and leisure on all indifference curves varies only by the level of income but remains unchanged by the hours of leisure,then
A) the substitution effect of a wage increase will be large.
B) the substitution effect of a wage increase will be small.
C) the income effect of a wage increase will be large.
D) the income effect of a wage increase will be small.
Q3) What is the distinction between the added worker effect and the discouraged worker effect? Which effect tends to dominate quantitatively?
Q4) An increase in the daily cost of child care would likely
A) increase the labor force participation rate of mothers.
B) increase the utility from not working.
C) increase the hours of work of mothers who continue to work.
D) increase the utility of a family with young children.
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Chapter 8: Compensating Wage Differentials and Labor
Markets
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Q1) If all workers like nice working conditions and labor markets are competitive (such that workers are mobile and fully informed),then in equilibrium
A) no worker will be in a job that does not have nice working conditions.
B) workers will prefer to work in jobs with nice working conditions.
C) workers will prefer to work in jobs without nice working conditions.
D) workers will be indifferent between jobs with and without nice working conditions.
Q2) Utility maximizing workers are interested in both the pecuniary and nonpecuniary aspects of their jobs.What is meant by nonpecuniary in this context? Give some examples of nonpecuniary aspects of a job.How would the nonpecuniary aspects of a job affect compensation?
Q3) Holding all other factors constant,workers who are strongly averse to risk will tend to have jobs paying
A) average wages.
B) below average wages.
C) above average wages.
D) at least average wages.
Q4) What is a compensating wage differential? What socially desirable ends does a compensating wage differential serve?
Page 10
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Chapter 9: Investments in Human Capital: Education and Training
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Q1) What is meant by the term present oriented? How is an individual's degree of present orientation captured in the human capital investment model? If,other things equal,an individual is more present oriented,how does this affect the likelihood that the individual will invest in additional schooling? Explain using the present value method.
Q2) Age/earnings profiles fan out by educational attainment level.According to human capital theory,this phenomenon occurs because
A) males earn more than females on average.
B) workers "signal" their interest in working to employers.
C) workers invest less in post-school job training as they age.
D) workers who invest more in schooling will also invest more in post-school job training.
Q3) Plot an age/earnings profile for a "typical" college graduate.How does human capital theory explain the shape of the age/earnings profile?
Q4) Age/earnings profiles for full-time,year-round female workers are flatter than age/earnings profiles for full-time,year-round male workers with comparable education.How does human capital theory account for this phenomenon?
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11
Chapter 10: Worker Mobility: Migration, Immigration, and Turnover
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Sample Questions
Q1) Which of the following would cause quit rates to decline?
A) an increase in the urbanization of the population
B) a decrease in the unemployment rate
C) a decrease in average wages
D) an increase in the average age of workers
Q2) The deportation of illegal aliens may create jobs on a one-to-one basis for native workers if
A) the minimum wage is above the equilibrium wage.
B) the minimum wage is below the equilibrium wage.
C) the labor supply curve is very steep.
D) the labor supply curve is very flat.
Q3) Suppose you have data for two groups of immigrants that are alike in age and educational status but who differ in that one group voluntarily immigrated (refer to them as economic immigrants)while individuals in the other group are political refugees that fled their home country and are unable to return.Draw a graph that plots earnings on the vertical axis against years in country on the horizontal axis for each group.(Note that your graph will be like an age/earnings profile graph except that time in country rather than worker age (which is controlled for here)is on the horizontal axis.)Explain why the profiles look as you have drawn them.
Page 12
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Chapter 11: Pay and Productivity: Wage Determination within
the Firm
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Q1) Which of the following factors will favor paying compensation by time rather than by output?
A) Output is easily measured and monitored.
B) The production of output requires the cooperation of many workers across the firm.
C) The industry's output is not affected by national economic conditions.
D) Workers are risk-seeking rather than risk-averse.
Q2) A company has a merit pay plan based on the relative performance of workers teams.Each worker in a team gets the same wage as other team members,but those in more productive teams get higher wages.Which of the following would NOT explain why this incentive might be better than other methods for motivating workers to work harder?
A) If a worker works harder, it increases the productivity of other team members.
B) If a team works harder, it does not affect the productivity of other teams.
C) One worker can easily sabotage the productivity of other workers.
D) One team can easily sabotage the productivity of other teams.
Q3) What are the basic features of a promotion tournament? What are the potential problems with a promotion tournament?
Q4) How does the payment of an efficiency wage affect worker productivity?
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Chapter 12: Gender,Race,and Ethnicity in the Labor Market
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Q1) Which of the following CANNOT explain differences in earnings of men and women?
A) experience
B) occupation
C) unobservable characteristics
D) income maximization by all workers
Q2) How does racial discrimination in the workplace lower wages among disfavored groups?
Q3) Racial occupational dissimilarities are ________ and have fallen ________ over time than gender-related occupational dissimilarities.
A) smaller; faster
B) smaller; slower
C) larger; faster
D) larger; slower
Q4) A study finds that handsome people make more than ugly people in occupations where workers interact with customers.This supports which of these models of discrimination?
A) employer discrimination
B) customer discrimination
C) employee discrimination
D) statistical discrimination
Page 14
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Chapter 13: Unions and the Labor Market
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Q1) 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.
Q2) Threat effects are
A) increases in union wages from threats to strike.
B) increases in non-union wages from threats to unionize.
C) decreases in union wages from management threats to use replacement workers during a strike.
D) decreases in non-union wages from the threat of replacement by unemployed union members.
Q3) What is the difference between the union relative wage advantage and the union absolute effect? Which is larger? Explain and illustrate your discussion with the appropriate graphical analysis.
Q4) What is a right-to-work law?
Q5) What is the union relative wage advantage? What is the estimated value of the union relative wage advantage?
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Chapter 14: Unemployment
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Q1) What is the wage curve? What is the efficiency wage explanation of the wage curve?
Q2) If all employers pay an efficiency wage and if workers in areas with low unemployment rates can easily find alternative jobs,then one would expect
A) average wages to be directly (positively) related to area unemployment rates.
B) average wages times one minus the unemployment rate to be the same across areas.
C) the duration of unemployment in an area, but not necessarily the rate, to be inversely related to the average wage of the area.
D) average wages will be higher in areas with low unemployment rates.
Q3) How is unemployment defined in the United States? How is the number of unemployed counted in the United States? What is the unemployment rate?
Q4) If all employers pay an efficiency wage,then
A) more employees would shirk.
B) unemployment would be higher.
C) firms would be better able to monitor their employees productivity.
D) all of the above
Q5) Does the unemployment insurance payroll tax encourage layoffs? Why or why not?
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Page 16
Chapter 15: Inequality in Earnings
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Q1) The Lorenz curve will ________ whenever the distribution of family income becomes less equal.
A) move closer to the diagonal line
B) become straighter
C) move farther from the diagonal line
D) cross the previous Lorenz Curve
Q2) The Gini coefficient is 0.20.What is the area under the Lorenz curve?
A) 0.10
B) 0.20
C) 0.30
D) 0.40
Q3) If all incomes were to fall by ten percent (due to deflation,for example)then the variance of income will
A) increase.
B) decrease.
C) remain unchanged.
D) either increase or decrease.
Q4) What institutional forces might account for the increase in earnings inequality observed since 1980? Explain.
Q5) Identify the major changes in earnings inequality in the U.S.since 1980.
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Chapter 16: The Labor-Market Effects of International Trade and
Production Sharing
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Q1) Lana is a freelance computer consultant who earns $500 per day for her services.Larry is a handyman who could earn $15 per hour at the local hardware store.Lana needs her house painted.She can paint the house in 5 days.Larry could paint Lana's house in 3 days' time ?(8 hours per day).What is Lana's opportunity cost of painting her own house? What is Larry's opportunity cost for painting Lana's house? Should Lana paint the house herself?
Q2) All of the output of industry X is made in America.Suppose now that a foreign nation's workers can produce at least part of industry X's good at a lower wage.The reduction in American jobs in industry X will be smaller when A) American workers, while getting a wage twice that of foreigners, are 50% more productive.
B) the supply of labor supply is highly elastic.
C) the elasticity of supply of American workers is more inelastic.
D) American workers are excellent substitutes for foreign workers.
Q3) Does more open international trade cause the wage level in a country to converge to the wage level paid in the rest of the world?
Q4) How does a country's move toward greater international trade affect labor demand through shifts in product market demand?
Page 18
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