Social Policy and Labor Markets
Exam Review
Course Introduction
This course examines the intersections between social policy and labor markets, exploring how government interventions and welfare programs influence employment, wages, inequality, and workforce participation. Students will analyze the design and impact of policies such as unemployment insurance, minimum wage laws, job training programs, family leave, and health benefits, with comparative perspectives across different countries. The course also considers contemporary challenges such as globalization, technological change, and demographic shifts, and discusses the role of labor market institutions and collective bargaining in shaping economic and social outcomes. Through discussion, case studies, and policy analysis, students gain insights into how effective social policy can promote both equity and economic efficiency within labor markets.
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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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Which is not a decision made by potential workers in the United States?
A)Deciding whether or not to participate in the labor force.
B)Determining how to divide one's time between work and leisure.
C)Choosing how much to produce to maximize firm profit.
D)Choosing how much education to receive.
E)Deciding which occupation to pursue.
Answer: C
Q2) Which of the following is a positive (rather than a normative) question?
A)What effect does increasing welfare assistance by 20% have on female labor supply?
B)Should the U.S.allow unlimited immigration?
C)Should the "Highly Qualified Teacher" provision of No Child Left Behind be eliminated?
D)Should there be a minimum wage?
E)Should trade unions be allowed to lobby Congress?
Answer: A
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3
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) The intertemporal substitution hypothesis suggests that hours of work should
A)be greatest during peak wage years.
B)steadily increase with age.
C)steadily decrease with age.
D)be greater for women than for men.
E)increase during retirement.
Answer: A
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4
Chapter 3: Labor Demand
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Sample Questions
Q1) What is an example of the scale effect?
A)Workers choose to provide more hours of labor when the wage rate decreases.
B)Hiring more labor as long as the marginal product of labor is positive.
C)The firm expands output when production costs fall.
D)The firm expands output when production costs increase.
E)The firm hires more labor when the wage falls because labor has become relatively cheaper compared to the price of other factors of production.
Answer: C
Q2) The cross-elasticity of labor with respect to capital is
A)the change in labor relative to a change in capital.
B)the change in wages relative to a change in the price of capital.
C)the percent change in labor relative to a percent change in capital.
D)the percent change in wages relative to a percent change in the price of capital.
E)the percent change in labor relative to a percent change in the price of capital.
Answer: E
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Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) When the government mandates that firms supply a particular benefit, it is usually the case that
A)the cost of providing the benefit is less than the worker's value of the benefit.
B)employment will increase.
C)the wage will increase.
D)the wage will decrease by more than the cost of providing the benefit.
E)the wage will decrease by less than the cost of providing the benefit.
Q2) 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.
Q3) Which of the following statements regarding immigration is true?
A)For each employed immigrant there is an unemployed native worker.
B)Immigration always results in lower native wages.
C)All immigrants are low-skilled.
D)Firms do not receive a substantial immigrant surplus.
E)Consumers benefit from immigration via lower prices.
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Page 6
Chapter 5: Compensating Wage Differentials
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Sample Questions
Q1) Which of the following is not a property of isoprofit curves graphed in Probability of Injury (x-axis) versus Wage (y-axis) space?
A)All points on each isoprofit curve yield the same level of profit.
B)Profit-maximizing firms are indifferent as to where they operate on any given curve.
C)Isoprofit curves going out along the x-axis yield higher profits.
D)Isoprofit curves going up along the y-axis yield higher profits.
E)Isoprofit lines are upward sloping.
Q2) Suppose there are two types of jobs-safe and risky.Safe jobs currently pay $10 per hour.Risky jobs currently pay $20 per hour.The government intervenes in the market, mandating that all firms offer safe jobs and pay a wage of $10 per hour.Which of the following is true?
A)Workers who originally worked safe jobs are helped by the policy.
B)Firms that originally offered safe jobs are hurt by the policy.
C)Workers who originally worked risky jobs are helped by the policy.
D)Firms that originally offered risky jobs are hurt by the policy.
E)No one is hurt by the new policy.
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Chapter 6: Human Capital
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Sample
Questions
Q1) Suppose Amy has 100 efficiency units of labor; Bill has 50 efficiency units of labor; and Chris has 20 efficiency units of labor.Which of the following is true?
A)A firm will always hire Amy over Chris, regardless of wages.
B)A firm will hire Amy if her wage is at least twice that of Bill's and at least five times that of Chris's.
C)A firm will hire Amy if her wage is at most double that of Bill's and at most five times that of Chris's.
D)A firm will never hire Bill.
E)A firm will never hire Chris.
Q2) 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.
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Chapter 7: The Wage Structure
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Sample Questions
Q1) What is the 50-10 wage gap if the 10<sup>th</sup> percentile wage is $25,000; the 50<sup>th</sup> percentile wage is $62,000; and the 90<sup>th</sup> percentile wage is $95,000?
A)0.52
Q2) What does it mean for the U.S.economy to have a positively skewed wage distribution?
A)Most workers earn below the average wage.
B)A large proportion of workers earn very high wages.
C)The average wage equals the median wage.
D)The distribution of wages is symmetric around the mean.
E)The mean wage equals the median wage.
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9
Chapter 8: Labor Mobility
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Sample Questions
Q1) State University wishes to hire another labor economist.It targets two economists, Amy and Beth, who are both currently working at a university in another state and who are both earning $68,000 per year.Amy is a 32 year-old, single assistant professor who lived in India and Germany as a child and who will come up for tenure in 2 years.Beth is a 50 year-old, married full professor with tenure who has worked for a single university for 22 years.The offer to either economist is for $75,000 per year and the ability to apply for tenure in 3 years.Given the information above, Amy is more likely to accept a job offer from State University than is Beth for several reasons.Which is the least likely reason why?
A)Because Amy is younger than Beth.
B)Because Amy is not yet tenured.
C)Because Amy faces lower moving costs.
D)Because Amy is single while Beth is married.
E)Because both women stand to earn $7,000 more per year by switching jobs.
Q2) Which statement is true?
A)The rate of job loss is unrelated to education.
B)The rate of job loss is highest for the least educated.
C)The rate of job loss is highest for the most educated.
D)The rate of job growth always exceeds the rate of job loss.
E)The rate of job growth always equals the rate of job loss.
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Page 10
Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) The female-male wage gap in the United States
A)has been increasing over the last 30 years.
B)has been decreasing over the past 30 years.
C)is non-existent.
D)has been decreasing so much that while a raw wage gap still exists it is quite small.
E)will likely change from negative to positive over the next decade.
Q2) A large employer gives each new hire an aptitude test, which is scored from 1 to 20.Let T be a worker's score on the test.The firm then pays the new worker a wage of w = 0.6T + 0.4G where G is the average test score for the worker's gender-16 for women; 12 for men.How much more is a woman paid than a man when both scored a 10 on the test?
A)$0.20
B)$0.40
C)$0.80
D)$1.60
E)$3.20
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Chapter 10: Labor Unions
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Sample Questions
Q1) Which of the following does not describe the historical patterns of unionization and strike activity in the United States?
A)The percent of workers involved in a strike has steadily decreased over the last 40 years.
B)The percent of public sector employees who are in a union remained relatively constant from 1950 to 2010.
C)The percent of time lost to a strike has steadily decreased over the last 40 years.
D)The percent of private sector employees who are in a union has steadily decreased over the last 40 years.
E)Union membership did not change very much from 1900 to 1935.
Q2) 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.
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12
Chapter 11: Incentive Pay
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Sample Questions
Q1) When considering the running of a corporation, there is a principal-agent problem between shareholders and the CEO because
A)shareholders want the firm to maximize the firm's share price while the CEO wants to maximize profits.
B)the CEO is paid in part with stock options.
C)shareholders cannot observe all of the CEO's decisions.
D)shareholders sign confidentiality agreements.
E)shareholders require the firm to pay a dividend.
Q2) Incentive pay schemes generally refer to A)firms paying as low wages as possible.
B)college-educated workers being paid more than non college-educated workers. C)workers retiring later in life.
D)any pay scheme in which all workers are paid equally according to tenure with the firm.
E)paying workers according to production or effort.
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Chapter 12: Unemployment
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Sample Questions
Q1) How does the asking wage depend on the unemployment insurance system in the United States?
A)The asking wage is constant regardless of the unemployment insurance system.
B)The asking wage will fall as the unemployed worker gets closer to exhausting his or her UI benefits.
C)The asking wage is lower while receiving UI benefits than it is when not receiving UI benefits.
D)The asking wage is lower the more likely it is to receive a job offer.
E)The asking wage is lower the more skills the unemployed worker has.
Q2) Which age group experiences the highest rates of unemployment in the United States?
A)16 to 24 years-old.
B)25 to 34 years-old.
C)35 to 44 years-old.
D)45 to 54 years-old.
E)55 to 64 years-old.
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