Workforce Economics Study Guide Questions
Course Introduction
Workforce Economics explores the fundamental economic principles and analytical tools used to understand labor markets and employment trends. The course examines key topics such as labor supply and demand, wage determination, human capital investment, labor market equilibrium, discrimination, and the impact of government policies on employment. Students analyze how demographic shifts, technological advancements, and globalization influence the composition and productivity of the workforce. Through case studies and real-world data, the course provides insights into labor force participation, unemployment, wage inequality, and the changing nature of work in modern economies.
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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Sample Questions
Q1) The labor demand curve shows how many workers the firm is willing to hire
A)at any particular time.
B)at a particular amount of labor supplied.
C)at any given wage.
D)into high-skill jobs.
E)when demand for the firm's output is low.
Answer: C
Q2) When forming theories, economists must be careful to
A)include all known facts and details.
B)omit crucial factors.
C)mirror the real world as realistically but as simply as possible.
D)consider historical behavior and policies.
E)limit the analysis to two variables.
Answer: C
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3
Chapter 2: Labor Supply
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Sample Questions
Q1) 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
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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Chapter 3: Labor Demand
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Sample Questions
Q1) The elasticity of substitutions is
A)the change in capital over the change in the price of labor.
B)the percentage change in capital over the percentage change in labor.
C)the change in the price of capital over the change in the price of labor.
D)the percentage change in the price of capital over the percentage change in the price of labor.
E)the percentage change in the capital/labor ratio resulting from a 1 percent change in the relative price of labor.
Answer: E
Q2) What is an example of the substitution 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: E
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Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) The general consensus is that wages in the stricken area increase substantially in the months immediately following a natural disaster. This is most likely a result of what?
A)The government requiring wages to increase.
B)The government's anti-gauging laws.
C)A decrease in labor demand.
D)A decrease in labor supply as some workers leave the afflicted area.
E)An increase in labor supply as workers stream to the afflicted area.
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) The cost of offering safe versus risky jobs in the highway construction industry vary across firms. In the end, we would expect the market equilibrium to
A)randomly match workers to jobs.
B)match workers who dislike risk to the highest paying jobs.
C)match workers who dislike risk to firms that find it cheapest to offer safe jobs.
D)have firms that face a high cost of offering safe jobs to pay the lowest wages.
E)have firms randomly choose their level of safety.
Q2) 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.
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Chapter 6: Human Capital
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Sample Questions
Q1) The data suggest that wages increase more with age for the highly educated compared to the less educated. This is evidence that
A)the return to education is low for all education levels.
B)the return to education is constant with respect to age.
C)on-the-job training is unrelated to the level of formal schooling.
D)less-educated workers invest in on-the-job training more so than do the highly educated.
E)highly educated people also invest more in post-schooling human capital compared to the less educated.
Q2) Suppose 40 percent of all potential workers are highly skilled and contribute $50,000 to the firm each year. The remaining 60 percent of potential workers are less-skilled and contribute only $30,000 to the firm each year. Schooling costs a highly skilled worker y per year, while it costs a less-skilled worker 2y per year. What range of y will support a signaling equilibrium?
A)$0 < y < $50,000
B)$5,000 < y < $10,000
C)$5,000 < y < $20,000
D)$10,000 < y < $20,000
E)$20,000 < y < $50,000
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Chapter 7: The Wage Structure
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Sample Questions
Q1) 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%
Q2) Social mobility refers to
A)the ability for a worker to move up in a firm's hierarchy.
B)the ability for a worker to increase his or her human capital.
C)the link between the skills and income of parents and children.
D)the relationship between human capital and wages.
E)the degree to which society dictates the wage distribution.
Q3) Which one of the following statements about the Gini coefficient is not 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.
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Page 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) 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) 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) Customer discrimination results in
A)lower wages for the discriminated-against worker group.
B)a lower output price regardless of who the firm hires.
C)a segregated workforce.
D)lower firm profits.
E)all of these are results of customer discrimination.
Q3) Discrimination in the workforce
A)leads to inefficiency.
B)never leads to higher utility.
C)empirically does not exist.
D)empirically is due primarily to employees and not employers or consumers.
E)empirically is due primarily to consumers and not employers or employees.
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11
Chapter 10: Labor Unions
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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) In the standard model of a monopoly union bargaining with the firm, it is typically assumed that
A)the union's sole objective is to increase the wage.
B)union leadership disregards the preferences of the rank and file.
C)unions never lead to an efficiency loss.
D)unions are willing to tradeoff some amount of higher earnings for greater employment.
E)unions and management secretly negotiate on the behalf of stockholders.
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Page 12
Chapter 11: Incentive Pay
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Sample Questions
Q1) One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages. This supports the efficiency wage model as it seems to provide evidence of what?
A)The existence of dual labor markets.
B)There are compensating differentials being paid depending on the type of work being done.
C)Unemployment is constant across sectors.
D)High-wage firms take advantage of delayed-compensation contracts.
E)Workers voluntarily provide bonds in case they are caught shirking.
Q2) Principal-agent problems arise when
A)the principal negotiates contracts on behalf of the agent.
B)the agent negotiates contracts on behalf of the principal.
C)the agent's objectives are different from the principal's objectives.
D)firm owners (the principals) pay employee wages (the agents) based on race.
E)workers (the principals) work harder when the firm owners (the agents) increase wages.
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Chapter 12: Unemployment
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Sample Questions
Q1) Which of the following is best considered an implicit contract?
A)A union contract that specifies hourly wages and fringe benefits.
B)A union contract that specifies how overtime wages will be calculated.
C)An informal agreement between a firm and its employees to reduce hours of work for everyone a little bit during an economic contraction in order to prevent firing anyone.
D)A firm offering health insurance to all of its workers in order to abide by the Affordable Care Act.
E)A historical agreement between a firm and its employees that the firm pays workers based on a combination of age, experience, and education.
Q2) 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.
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Page 14