Public Policy and Labor Markets
Exam Practice Tests
Course Introduction
This course explores the intersection between public policy and labor markets, examining how government interventions influence employment, wages, and labor market dynamics. Students will analyze the design, implementation, and effects of policies such as minimum wage laws, unemployment insurance, job training programs, labor market regulations, and tax policies. Through case studies and empirical research, the course highlights the economic and social implications of various policy choices, equipping students with the tools to critically evaluate current labor market issues and formulate effective policy solutions.
Recommended Textbook Labor Economics 7th 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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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Which of the following affects the wage a firm is willing to pay its workers?
A)The productivity of workers.
B)Consumer demand for the goods and/or services that the firm creates.
C)The amount of fringe benefits the firm is required by law to pay.
D)The level of payroll taxes the firm must pay.
E)All of the above affect the wage a firm is willing to pay its workers.
Answer: E
Q2) Labor market equilibrium is best characterized by:
A)A wage at which all people have a job.
B)A wage at which all workers are above the poverty level.
C)A wage at which the number of people willing to work equals the number of workers firms are willing to hire.
D)A minimum wage at which everyone is willing to work.
E)All workers receiving their ideal wage.
Answer: C
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3
Chapter 2: Labor Supply
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Sample Questions
Q1) How does the presence of an underground labor market bias the government's calculation of the labor force participation rate?
A)The official government statistic on labor force participation is too low, because people working in the underground labor market should be counted as participating in the labor market.
B)The official government statistic on labor force participation is too high, because people working in the underground labor market should be counted as participating in the labor market.
C)The official government statistic on labor force participation is too low, because people working in the underground labor market should not be counted as participating in the labor market.
D)The official government statistic on labor force participation is too high, because people working in the underground labor market should not be counted as participating in the labor market.
E)The official government statistic on labor force participation is identical to actual labor market participation whether or not there is an underground labor market.
Answer: A
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4
Chapter 3: Labor Demand
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Sample Questions
Q1) In the U.S. labor market, it is typically the case that:
A)If job creation is high, then job destruction is low.
B)If job creation is low, then job destruction is high.
C)There is relatively little job destruction during economic up-turns.
D)There is relatively little job creation during economic down-turns.
E)There is a large amount of job creation and job destruction happening at the same time, during both expansions and contractions.
Answer: E
Q2) Adjustment costs are those costs
A)incurred by a firm as it transports its product from the factory to the marketplace.
B)incurred by a firm when it pays its workers overtime.
C)incurred by a firm as it changes the size of its workforce.
D)saved by a firm as it takes advantage of tax credits offered by the government.
E)saved by the firm when it sells one more unit of output.
Answer: C
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Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) The assumption that a firm operates in a competitive labor market means that
A)the firm offers a real wage rate that is indexed for inflation.
B)the firm faces an upward-sloped marginal cost of labor curve.
C)the firm faces a downward-sloped marginal cost of labor curve.
D)the firm faces a constant wage regardless of how much labor it employs.
E)the firm doesn't use capital in the production process.
Q2) If native workers and immigrants are substitutes, then
A)native workers will be better off with open borders.
B)native workers will encourage immigration.
C)native firms will discourage immigration.
D)immigrant workers will receive a higher wage than native workers.
E)immigration will shift the labor supply curve to the right.
Q3) Standard economic theory suggests which of the following in terms of labor migration across states in the U.S.?
A)Workers migrate randomly.
B)Workers migrate at most twice per lifetime.
C)Workers are likely to migrate from low-wage states to high-wage states.
D)Workers are likely to migrate from high-wage states to low-wage states.
E)Older workers are more likely to migrate than are younger workers.
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Page 6
Chapter 5: Compensating Wage Differentials
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Sample Questions
Q1) A firm has the choice of offering "dirty" jobs that are likely to cause severe health problems for its workers or of offering "clean" jobs by installing safety equipment at a cost of $5 per hour per employee that will substantially reduce the chances of health problems. The firm will
A)install the safety equipment if workers can ascertain whether they are working a dirty or a clean job.
B)never willingly choose to install the costly safety equipment.
C)never install the safety equipment without a government subsidy to do so.
D)install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job.
E)willingly install the safety equipment if workers are willing to be paid $7 per hour less in a clean job than in a dirty job.
Q2) A potential implication of OSHA regulation is that
A)the most risk averse workers begin working the riskiest jobs.
B)the hedonic wage function may no longer exist at the safest levels.
C)the hedonic wage function may no longer exist at the riskiest levels.
D)average wages increase.
E)for the same amount of output produced, total production costs will be less.
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Page 7
Chapter 6: Human Capital
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Sample Questions
Q1) Why might people choose to go to college?
A)Because a college education signals to firms that the worker is highly motivated.
B)Because a college education increases one's productivity, which will be rewarded in the labor market with higher wages.
C)Because someone enjoys the process of becoming educated.
D)Because one cannot find employment.
E)All of the above.
Q2) Why do workers typically pursue their education while young?
A)Because there is more time to benefit from the higher wages that are typically associated with more education.
B)Because all of their friends pursue education while young.
C)Because living expenses are low for a younger person.
D)Because parents force their children to attend college immediately after high school.
E)Because they are more likely to receive a scholarship.
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Chapter 7: The Wage Structure
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Sample Questions
Q1) In the context of intergenerational inequality, regression toward the mean is captured by which of the following?
A)The tendency for inequality to be wider as a country experiences economic growth.
B)The tendency for countries to diverge in their inequality.
C)The tendency for income differences across families to get smaller over time as the various families move toward the mean income of the population.
D)The tendency for the 90-50 wage gap to approach the 50-10 wage gap as a country experiences economic growth.
E)The tendency for the tax code to erode inequality by targeting the mean tax rate to mean income.
Q2) In the United States, the poorest 10 percent of households earn approximately what share of total income?
A)2%
B)5%
C)10%
D)20%
E)50%
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Chapter 8: Labor Mobility
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Sample Questions
Q1) Which of the following regarding internal migration in the United States is not true?
A)Migration is more common among younger workers compared to older workers.
B)Migration is more common among educated workers compared to uneducated workers.
C)Migration equalizes wages across regions.
D)Empirically the mystery is why there is not more internal migration, not why there is not less.
E)Repeat and return migration are rational decisions and routinely occur.
Q2) Which of the following is least likely to affect the net gain to migration?
A)An improvement in economic opportunities in the destination state.
B)An improvement in economic opportunities in the source state.
C)An increase in migration costs.
D)Changing one's preferences for living in different places.
E)A general increase in the national price level.
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Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) Over the last 30 years in the United States, the black-white earnings ratio for women has __________ and for men has __________.
A)been relatively flat; steadily increased
B)been relatively flat; steadily decreased
C)steadily increased; steadily increased
D)steadily increased; steadily decreased
E)steadily increased; been relatively flat
Q2) If one looks at U.S. Census data and finds that the average white salary is $39,000 while the average black salary is $36,000, which of the following is not likely to be a significant cause of this difference given U.S. labor market demographics?
A)Whites are more inclined than blacks to work part-time.
B)Blacks have less education than whites.
C)Labor market discrimination.
D)Whites are more likely than blacks to hold positions in upper management.
E)Whites are more likely than blacks to own their own business.
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Chapter 10: Labor Unions
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Sample Questions
Q1) Which of the following do unions usually advertise to their members and potential members?
A)High wages.
B)Steady employment.
C)An exit voice.
D)A powerful political lobby.
E)All of these are used for advertising to members and potential members.
Q2) In a basic model of wage and employment determination with a monopoly union, the monopoly union stipulates the wage. The firm then responds by choosing an employment level that
A)maximizes profit.
B)minimizes labor costs.
C)minimizes the wage.
D)maximizes strike duration.
E)maximizes output.
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Chapter 11: Incentive Pay
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Sample Questions
Q1) Middle-aged workers being paid more than their younger counterparts is likely due to
A)the natural inverse relationship between age and experience.
B)the implementation of a mandatory retirement age by the firm.
C)more recent education and job training programs being more effective than older programs.
D)firms using a delayed compensation scheme.
E)workers prefer delaying their earnings to as late in life as possible.
Q2) Which one of the following statements best describes profit sharing?
A)Profit sharing is an equal division of all revenues among workers.
B)Profit sharing ties pay to the performance of individuals.
C)Profit sharing is a program that donates profits to the poor.
D)Profit sharing provides a system by which workers receive a share of the firm's profits.
E)Profit sharing discourages free-riding among workers.
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13
Chapter 12: Unemployment
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Sample Questions
Q1) What is the general relationship between race and unemployment rates in the United States?
A)Whites have the lowest rate of unemployment; Hispanics have the highest rate of unemployment.
B)Whites have the lowest rate of unemployment; blacks have the highest rate of unemployment.
C)Hispanics have the lowest rate of unemployment; whites have the highest rate of unemployment.
D)Hispanics have the lowest rate of unemployment; blacks have the highest rate of unemployment.
E)Blacks have the lowest rate of unemployment; Hispanics have the highest rate of unemployment.
Q2) In the United States, the average replacement ratio associated with unemployment insurance benefits is
A)10%
B)35%
C)50%
D)80%
E)100%
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