Public Policy and Labor Markets
Test Preparation
Course Introduction
This course explores the dynamic interaction between public policy and labor markets, examining how government interventions shape employment, wages, working conditions, and labor force participation. Students will analyze the rationale behind labor market regulations, social insurance programs, minimum wage laws, unemployment benefits, and active labor market policies. Economic theories and empirical evidence will be used to assess the impact of these policies on both individuals and the broader economy, with attention to issues such as inequality, discrimination, and technological change. The course aims to equip students with the analytical tools to critically evaluate existing and proposed labor market policies in diverse political and economic contexts.
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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Chapter 1: Introduction to Labor Economics
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) A firm's labor demand curve is typically
A)a vertical line.
B)a horizontal line.
C)upward-sloping.
D)downward-sloping.
E)associated with a slope equal in absolute value to the slope of the labor supply curve.
Answer: D
Q2) Suppose labor supply can be described as E<sub>S</sub> = 0.1w - 1,000 where w is yearly salary. What yearly salary must be paid to encourage 6,000 workers to accept jobs?
A)$30,000
B)$40,000
C)$50,000
D)$60,000
E)$70,000
Answer: E
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3
Chapter 2: Labor Supply
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) All of the following represent an increase in non-labor income except for:
A)A decrease in the income tax rate.
B)Receiving higher dividends from a stock portfolio.
C)An increase in a spouse's wage.
D)Receiving an inheritance from a long-lost uncle who recently passed away.
E)Having one's property tax bill fall by $1,000.
Answer: A
Q2) What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 112 hours in the week to work, and she receives non-labor income of $220 per week?
A)C = 1,340
B)C + 10L = 1,340
C)L = 10C + 220
D)C - 10L = 900
E)10C - L = 900
Answer: B
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Chapter 3: Labor Demand
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30 Flashcards
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Sample Questions
Q1) The imposition of a minimum wage on a competitive labor market will likely
A)create additional employment opportunities because some low-skilled workers will now see their wage increase.
B)lower the wages of workers earning more than the minimum wage.
C)create unemployment as some people enter the labor market while some firms reduce the quantity of labor they are willing to employ due to the increased wage.
D)increase unemployment of high-skilled workers as firms substitute high-skilled labor for low-skilled labor.
E)lower the unemployment rate of low-income families.
Answer: C
Q2) Firms usually face asymmetric variable adjustment costs because
A)hiring costs are typically higher than firing costs.
B)firing workers is relatively easy compared to hiring workers.
C)firing workers can be difficult and costly for legal reasons compared to hiring workers.
D)workers are reluctant to change jobs during a recession but not during an expansion.
E)firms vary in size.
Answer: C
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Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) Which of the following statements regarding the Affordable Care Act (ACA) is true?
A)The ACA could have negative employment effects as some firms will not expand above having 50 workers in order to avoid the mandate.
B)The ACA should not be viewed as an employer-provided benefit as the ACA is a federal mandate.
C)The ACA will likely lead to an increase in wages.
D)Prior to the passage of the ACA, over 100 million (more than one-third of) Americans did not have health insurance.
E)All of the statements are true.
Q2) In a noncompetitive labor market, the firm pays a wage that is less than the workers' value of marginal product because
A)the marginal cost of labor curve is above the labor supply curve.
B)the labor supply curve is above the marginal cost of labor curve.
C)labor is supplied inelastically.
D)the firm's labor demand curve is downward-sloping.
E)the firm's objective is to minimize the wage rather than to maximize profits.
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6
Chapter 5: Compensating Wage Differentials
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30 Flashcards
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Sample Questions
Q1) In Probability of Injury (x-axis) versus Wage (y-axis) space, isoprofit curves slope upward because
A)profits increase with the number of workers the firm employs.
B)workers are willing to accept a lower wage in exchange for a riskier work environment.
C)the firm does not like to pay higher wages.
D)in order to keep profits constant, a higher wage must be offset by the firm saving money by not investing as much in preventing on-the-job injuries.
E)profits are constant with respect to risk.
Q2) If the U.S. system of unemployment insurance didn't exist, one would predict that A)workers would never become unemployed.
B)workers who became unemployed would remain unemployed for longer durations.
C)no worker would accept a job that is associated with seasonal unemployment.
D)seasonal unemployment would cease to exist.
E)workers in jobs that have high risks of unemployment or in jobs that face seasonal cycles of unemployment would be paid higher wages.
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Chapter 6: Human Capital
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Sample Questions
Q1) In 2013, approximately what percent of adults in the United States had not graduated from high school?
A)2%
B)5%
C)10%
D)15%
E)20%
Q2) Selection bias is a problem when trying to estimate the return to education in a standard human capital model. In this context, what does selection bias refer to?
A)Having a non-random data sample.
B)Workers self-select education levels and jobs based on their abilities and preferences.
C)Colleges select who they are willing to accept.
D)The wage-schooling locus does not have a constant slope.
E)The wage-schooling locus is estimated to have a negative slope.
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Chapter 7: The Wage Structure
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Sample Questions
Q1) Which of the following statements regarding the increase in supply of high-skill labor in the United States since 1960 as measured by education level is not true?
A)The percent of workers without a high school degree has fallen dramatically since 1960.
B)The percent of workers with a high school degree has fallen dramatically since 1960.
C)The percent of workers with a college degree has increased dramatically since 1960.
D)The percent of workers with an advanced degree has increased dramatically since 1960.
E)The supply of highly-skilled women to the workforce has increased dramatically since 1960.
Q2) In the United States over the last 30 years, wage differentials have
A)narrowed for all groups of workers.
B)increased for all groups of workers.
C)increased for skilled workers but have narrowed for unskilled workers.
D)decreased for skilled workers but have increased for unskilled workers.
E)increased for women but have narrowed for men.
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Chapter 8: Labor Mobility
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Sample Questions
Q1) What is a likely explanation as to why workers who have been on the job for a long time earn more than newly hired workers?
A)Because workers in bad job matches tend to stay on the job longer.
B)Because workers in long-lasting job matches accumulate specific training over time, which increases the workers' productivity.
C)Because the positive effects of general training on education erode over time.
D)Young workers are more productive than older workers.
E)U.S. law requires older workers to be paid more than younger workers.
Q2) Which one of the following statements regarding job turnover is false for the U.S. labor market?
A)The quit rate is almost always higher than the layoff rate.
B)The overall separation rate is much higher for younger workers than older workers.
C)The rate of job loss is highest for the least educated.
D)Workers who have a lot of seniority are likely to switch to a different firm when their wage-age profile begins to flatten out.
E)Men are much more likely to hold a long term job than are women.
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Page 10
Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) 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.
Q2) 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.
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Chapter 10: Labor Unions
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30 Flashcards
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Sample Questions
Q1) Which of the following is a reason why the union wage gap might under-estimate the actual effect unions have on wages?
A)Unions typically attract the most productive workers to the application pool.
B)Non-union firms may pay higher wages in order to prevent its workers from unionizing.
C)Non-union jobs will have excess labor available to them because firms will restrict entry into union jobs, and competition for this excess labor competes down the observed non-union wage.
D)Unions target high-paying firms.
E)The union wage gap can be over-estimated, but never underestimated.
Q2) What is the union wage gap if the average union salary is $92,000 while the average non-union salary is $80,000?
A)10%
B)13%
C)15%
D)87%
E)125%
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12
Chapter 11: Incentive Pay
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Sample Questions
Q1) 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.
Q2) 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.
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Chapter 12: Unemployment
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30 Flashcards
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Sample Questions
Q1) Which of the following would not increase the asking wage?
A)The government expands UI benefits from 26 to 52 weeks.
B)The government increases the maximum weekly unemployment benefit from $500 to $800.
C)An increase in the unemployment rate.
D)Having one's spouse receive a pay raise.
E)The government stops taxing UI benefits.
Q2) Which is not a likely explanation as to why unemployment rates are higher in Europe than in the United States?
A)Most European countries offer more generous unemployment insurance benefits than in the United States.
B)Most European countries have stronger employment protection restrictions than in the United States.
C)There is more wage rigidity in Europe than in the United States.
D)Europeans are less productive than Americans.
E)Most European countries offer unemployment benefits for longer than they are available in the United States.
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