Test Bank for Labor Economics, 6th Edition by George Borjas | All Chapters 1-12 by ACADEMIAMILL

Chap 01_6e Student: ___________________________________________________________________________

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.

Which of the following is not a leading actor in labor markets? A. Consumers B. Firms C. Workers D. Government E. Unions

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.

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?

Which of the following is a normative (rather than a positive) statement? A. The (nominal) minimum wage is $7.25 per hour. B. Public education should be funded primarily at the state level. C. The federal debt exceeds $8 trillion. D. At its peak, unemployment exceeded 10% during the 2007 recession. E. The average wage of high-school dropouts has fallen by 20% since 1970.

Suppose labor supply can be described as ES = 0.1w - 1,000 where w is yearly salary. How many workers are willing to work when the yearly salary is $20,000? A. 100 B. 200 C. 500 D. 1,000 E. 2,000

Suppose labor supply can be described as ES = 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

Suppose labor supply can be described as ES = 0.1w - 1,000 where w is yearly salary. How many more workers are willing to work at a yearly salary of $40,000 than at a yearly salary of $35,000? A. 50 B. 100 C. 500 D. 1,000 E. 5,000

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.

10. An outward shift in the labor demand curve implies that. A. employers are now looking to hire more workers at any given wage. B. employers are now looking to hire more workers if the wage increases. C. employers are now looking to hire fewer workers regardless of the wage. D. demand for the firm's output likely fell. E. a greater number of workers are now more willing to work at any given wage. 11. The labor supply curve shows how many workers are willing to work A. in a particular industry. B. at any given time. C. at the minimum wage. D. at any given wage. E. in order to maximize the firm's profit. 12. An upward-sloping labor supply curve implies that A. a firm can always hire more workers, even without increasing the wage. B. more workers are willing to work when wages are low. C. more workers are willing to work as the market wage increases. D. labor supplied is fixed. E. there is a continuously increasing demand for labor. 13. What type of questions can be answered with economic tools without interjecting any value judgment as to whether the particular outcome is desirable or harmful? A. Normative questions. B. Positive questions. C. Labor questions. D. Econometric questions. E. Public policy questions. 14. What type of questions cannot be answered with theory or facts alone? A. Normative questions. B. Positive questions. C. Factual questions. D. Empirical questions. E. Econometric questions. 15. In part labor economics concerns: A. How labor markets work. B. The study of education decisions. C. The study of how households decide where to live. D. The study of income inequality. E. All of the above.

16. What is the difference between normative and positive economics? A. Normative economics concerns the how and why of economic activity while positive economics concerns what should be. B. Positive economics concerns what is, while normative economics concerns what should be. C. Both concern the how and why of economic activity, while only positive economics also concerns what should be. D. Neither deals with the how and why of economic activity, but normative economics concerns what should be. E. Positive economics is used in Microeconomics, while normative economics is used in Macroeconomics. 17. The government is a player in the U.S. labor market in part because the government A. determines who can go to college. B. assigns potential workers to particular industries. C. sets workplace worker safety regulations. D. suggests a minimum wage for firms to pay. E. funds employer-based health insurance benefits. 18. 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. 19. The typical labor supply curve A. is u-shaped. B. equals the marginal product of labor. C. slopes up. D. slopes down. E. depends on the size of the firm. 20. A firm's demand for labor is derived in part from A. government policy. B. consumer demand for the firm's product. C. unionized workers. D. the firm's sunk costs. E. the value of the firm's stock price. 21. The market for economists in Greenland has recently experienced an increase in the number of economists employed and an increase in the wage of economists. What could explain such a change? A. The demand for economists recently increased while the supply of economists remained unchanged. B. The demand for economists recently decreased while the supply of economists remained unchanged. C. The demand for economists remained unchanged while the supply of economists increased. D. The demand for economists remained unchanged while the supply of economists decreased. E. The demand for economists recently decreased while the supply of economists recently increased. 22. 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.

23. Which of the following affects a person's decision to work? A. The price of consumption goods relative to the wage. B. The person's income from non-labor sources. C. How much the person enjoys working. D. The amount of fringe benefits offered to the person. E. All of the above affect a person's decision to work. 24. 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. 25. What is likely to happen to the demand for firemen as building codes change to require firewalls and sprinklers to be included in all new construction? A. The demand for firemen will fall as the demand for fire protection services falls. B. The demand for firemen will increase as the supply of firemen falls when old buildings are replaced with newer buildings. C. The demand for firemen will remain unchanged as firemen don't build new construction. D.The demand for firemen will increase as long as wages paid to workers on new construction projects exceed the minimum wage. E.The demand for firemen will decrease as long as the property tax-base increases when the new construction projects are completed. 26. What is likely to happen to the supply of firemen as building codes change to require firewalls and sprinklers to be included in all new construction? A. The supply of firemen will fall because there will be fewer fires. B. The supply of firemen will increase because there will be fewer fires. C The supply of firemen will remain unchanged because the supply curve relates the number of fire . fighters to the wage, not to the number of fires. D. The supply of firemen will increase as long as wages paid to workers on new construction projects is also increasing. E. The supply of firemen will decrease as long as the property tax-base increases when the new construction projects are completed. 27. What is likely to happen to the labor market equilibrium for firemen as building codes change to require firewalls and sprinklers to be included in all new construction? A. The number of firemen employed will increase while firemen wages will decrease. B. The number of firemen employed will decrease while firemen wages will decrease. C. The number of firemen employed will increase while firemen wages will increase. D. The number of firemen employed will decrease while firemen wages will increase. E. The number of firemen employed will remain the same while firemen wages will increase. 28. Any economic model should be judged primarily on: A. How realistic its assumptions are. B. How accurately its predictions match observed behavior. C. How easy the model is to use. D. How many aspects of real-world behavior and choices are incorporated in the model. E. How original the model is compared to other models. 29. In an econometric model, the dependent variable is A. the behavior one is trying to explain. B. unchanging across sub-samples. C. always the wage. D. also known as the residual. E. unrelated to the independent variables.

30. When plotting log wages (y-axis) against years of schooling (x-axis), the slope of the regression line indicates A. the average wage. B. the average logged wage. C. the average years of schooling. D. the economic return to each additional year of schooling measured in dollars. E. the economic return to each additional year of schooling measured in percentage terms.

Chap 01_6e Key 1. C 2. A 3. C 4. A 5. B 6. D 7. E 8. C 9. C 10. A 11. D 12. C 13. B 14. A 15. E 16. B 17. C 18. D 19. C 20. B 21. A 22. E 23. E 24. C 25. A 26. C 27. B 28. B 29. A 30. E

Chap 01_6e Summary Category Borjas - Chapter 01

# of Question s 30

Chap 02_6e Student: ___________________________________________________________________________

Who is not counted in the U.S. labor force? A. A person working 15 hours a week or more not for pay. B. A fulltime college student. C. A person working at least one hour for pay per week. D. Someone actively looking for a job. E. A 70-year-old person who supplements his social security payments by working 8 hours each week at minimum wage.

Which of the following is not a property of standard indifference curves in a leisure-consumption model? A. Indifference curves tend to be downward sloping. B. Higher indifference curves (to the northeast) indicate higher levels of utility. C. Indifference curves tend to be convex to the origin. D. There is an indifference curve passing through every leisure-consumption bundle. E. Indifference curves intersect one another.

Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force. Of these, 240,000 are employed and 60,000 are unemployed. What is the labor force participation rate? A. 25% B. 48% C. 55% D. 60% E. 80%

Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force. Of these, 240,000 are employed and 60,000 are unemployed. What is the unemployment rate? A. 10% B. 20% C. 25% D. 35% E. 40%

Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force. Of these, 240,000 are employed and 60,000 are unemployed. Of the 200,000 workers not in the labor force, 20,000 want jobs but have given up looking for one. What is the unemployment rate if discouraged workers are counted as being unemployed? A. 10% B. 20% C. 25% D. 48% E. 60%

Assuming consumption and leisure are normal goods, hours worked will fall when the wage increases if A. the income effect dominates the substitution effect. B. the substitution effect dominates the income effect. C. the income and substitution effect move in the same direction (i.e., if they are of the same sign). D. the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign). E. the wage increase is accompanied by an increase in prices.

An increase in non-labor income while holding the wage rate constant A. rotates the budget line out along the consumption axis. B. rotates the budget line out along the leisure axis. C. rotates the budget line in along the leisure axis. D. rotates the budget line in along the consumption axis. E. shifts the budget line up (in the direction of the consumption axis) while maintaining the same slope.

According to the substitution effect, in response to an increase in her wage a person will A. reduce hours worked because she wants to substitute leisure for work. B. reduce hours worked because she wants to substitute work for leisure. C. increase hours worked because leisure has become relatively more expensive than consumption. D. increase hours worked because leisure has become relatively less expensive than consumption. E. increase both consumption and hours of leisure.

What would a person do if the market wage is less than his or her reservation wage? A. The person will enter the labor market. B. The person will work as much as possible. C. The person will work more hours as the wage falls further. D. The person will be unemployed. E. The person will not participate in the labor force.

10. Which of the following statements did not reflect the U.S. labor market in the early 2000s? A. Of working men and women, the average man tended to work more annual hours than the average woman. B. The labor force participation rate of men was greatest between the ages of 25 and 55. C. A greater percentage of women than men worked part-time. D. Labor force participation was unrelated to education. E. The labor force participation rate over all women was about 70 percent. 11. What is the budget line for consumption (C) and leisure (L) if a person faces a constant wage of $10 per hour, there are 168 hours in the week to work, and she receives non-labor income of $220 per week? A. C = 1,900 B. C + 10L = 1,900 C. L = 10C + 220 D. C - 10L = 1,460 E. 10C - L = 1,460 12. 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. 13. According to the income effect, an increase in the wage rate will lead the worker to A. work more hours if leisure is a normal good. B. work fewer hours if leisure is a normal good. C. work fewer hours if leisure is an inferior good. D. work more hours and leisure more hours. E. not change hours worked.

14. 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% 15. The Earned Income Tax Credit is a federal program that A. increases the wages of minorities. B. provides cash assistance to the non-working poor. C. provides cash assistance to firms that hire single mothers living in poverty. D. increases wages for the working poor. E. provides in-kind assistance to minimum wage workers. 16. The single most important phenomenon in the U.S. labor market in the second half of the 20th century was A. the drastic reduction in the labor force participation rate of males. B. the drastic increase in the labor force participation rate of females. C. the elimination of the glass ceiling. D. the increase in the average number of hours worked each week. E. the elimination of child poverty. 17. When the tax rate on wages falls (so that the take-home wage or effective wage increases), the budget line A. rotates out along the consumption axis. B. shifts out, parallel to the old budget line. C. rotates in along the leisure axis. D. shifts in, parallel to the old budget line. E. rotates out along the leisure axis. 18. When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers? A. 0 B. 0.5 C. 1.0 D. 1.5 E. 2.0 19. What is the added worker effect? A. A secondary worker enters the labor force when the wage rate is high. B. A secondary worker enters the labor force when his or her consumption of goods exceeds his or her non-labor income. C. A secondary worker enters the labor force when his or her household productivity decreases. D. A secondary worker enters the labor force when he or she no longer must allocate time to household production. E A secondary worker enters the labor force when the main worker in the household has lost his or her . job or has experienced a wage cut.

20. Due to the discouraged worker effect, the labor force participation rate A. increases during a recession. B. decreases during a recession. C. is counter-cyclical. D. over-counts the number of workers wanting a job. E. over-counts the number of workers with a job. 21. How does the presence of an underground labor market bias the government's calculation of the labor force participation rate? AThe 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. BThe 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. CThe 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. DThe 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. 22. According to the added worker effect, what happens during a recession? A. Households consume less. B. More inferior goods are purchased. C. Capital earns a lower rate of return. D. There is an increase in the labor force participation rate of secondary workers. E. There is a decrease in the labor force participation rate as many unemployed workers give up looking for a job. 23. How does the labor force participation rate of women compare to that of men? A. The labor force participation rates between the two groups is about the same. B. Men participate less than women at all ages. C. Women participate less than men at all ages. D. Women participate less than men when young (20-34 years-old) but at the same rate as men in later years (35-54 years-old). E. Men participate less than women when young (20-34 years-old) but at the same rate as women in later years (35-54 years-old). 24. 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. 25. Which one of the following conclusions is not supported by the intertemporal substitution hypothesis? A. The profile of hours of work over the life cycle will have roughly the same shape as the age-earnings profile. B. Hours of work over the life cycle will be inversely related to wages over the life cycle. C. Hours of work increase as the wage rises and decline as the wage falls. DAn unemployed person might choose to become a discouraged worker during a low-wage recession . with an eye toward returning to the labor market when wages increase. E.A high wage worker may choose to work 60+ hours a week during her peak wage years in order to retire at a younger age later in life.

26. Fertility in the U.S. declined in the last 100 years primarily because A. real income has increased and children are inferior goods. B. the tax benefits for families with children have expanded. C. the cost of having children has decreased, primarily in terms of healthcare and education costs. D. the cost of having children has increased, primarily in terms of the opportunity cost of the mother's foregone wages. E. economic growth has slowed, prohibiting households from efficiently having large families. 27. 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. 28. Why might it be wrong to include self-proclaimed discouraged workers in calculations of the unemployment rate? A. Discouraged workers likely have a job but are discouraged only because they would like a betterpaying job. B. Some discouraged workers are taking advantage of a low-wage period to consume large amounts of leisure. C. Discouraged workers receive federal assistance. D.Discouraged workers are already included in official unemployment statistics as long as no one else in their household is working. E. By definition, discouraged workers are only temporarily laid-off, and they will return to a job shortly. 29. Due to the added worker effect, the labor force participation rate A. increases during a recession. B. decreases during a recession. C. a fairly useless statistic. D. over-counts the number of workers wanting a job. E. over-counts the number of workers with a job. 30. The reservation wage likely increases when A. the price of consumption increases. B. the wage increases. C. the price level (of consumption and wages) increases. D. non-labor income increases. E. one is a discouraged worker.

Chap 02_6e Key 1. B 2. E 3. D 4. B 5. C 6. A 7. E 8. C 9. E 10. D 11. B 12. A 13. B 14. D 15. D 16. B 17. A 18. B 19. E 20. B 21. A 22. D 23. C 24. A 25. B 26. D 27. E 28. B 29. A 30. D

Chap 02_6e Summary Category Borjas - Chapter 02

# of Question s 30

Chap 03_6e Student: ___________________________________________________________________________

At what point should a firm stop hiring workers? A. When the wage per worker starts to increase. B. When the price of capital starts to decrease. C. When the firm's marginal gain from hiring an additional worker is zero. D. When the firm's marginal profit from hiring an additional worker equals the cost of hiring that worker. E. When the firm's value of marginal product equals zero.

The production function relates A. factor prices to output prices. B. wages to labor employed. C. factors of production to total output. D. factors of production to profit. E. the output price to factors of production.

How does a profit-maximizing firm that is operating in a competitive labor market respond to an increase in the wage rate? A. The firm will demand less capital due to the substitution effect. B. The firm will demand more labor due to the substitution effect. C. The firm will produce less output due to the scale effect. D. The firm will demand more capital due to the scale effect. E. The firm will demand more labor due to the scale effect.

How would imposing a minimum wage above the market clearing wage affect employment in a competitive labor market? A. Employment would increase as previously unemployed workers would be more encouraged to find a job. B. Employment would increase because a higher minimum wage would create more jobs for low-skilled workers. C. Employment would increase as firms would illegally hire workers below the original competitive wage. D. Employment would be unchanged as workers are non-responsive to low wages. E Employment would decrease as some workers who are willing to work at the lower competitive wage . would no longer be able to find work.

What is not true when thinking of the firm's objective as a cost-minimization problem rather than as a profit-maximization problem? A. The slope at any point on any isoquant reveals the marginal rate of technical substitution. B. The firm chooses labor and capital to minimize its costs. C. The firm chooses a particular level of output to produce. D. The price of the output good never enters the decision as to how much labor or capital to employ. EThe firm will choose labor and capital inputs so that the marginal productivity of labor relative to the . marginal productivity of capital equals the price of labor relative to the price of capital.

The slope of the production function while holding capital fixed is A. the marginal product of labor. B. the marginal product of capital. C. the average product of labor. D. the labor-capital ratio. E. the capital-labor ratio.

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.

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.

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.

10. In the long run, a decrease in the competitive wage will be associated with which of the following? A. A substitution effect in favor of employing more capital. B. A scale effect in favor of employing more labor. C. More employment if the wage decrease was a result of a decrease in the demand for labor. D. Less employment if the wage decrease was a result of an increase in the supply of labor. E. An increase in the output price. 11. In the United States, the federal minimum wage is legislated in nominal terms. This means that A. the federal minimum wage is indexed for inflation. B. the federal minimum wage historically decreases in value during stretches when the minimum wage is not increased. C. employers do not have to pay payroll taxes on wages paid to minimum wage workers. D. unemployed workers collect government assistance equal to the minimum wage. E. the government pays the minimum wage to all local, state, and federal workers. 12. Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1,000 of capital borrowed. Consider the isocost line associated with spending $8,000 per week, and let the y-axis be the amount of capital borrowed in $1,000s. Which of the following is not true? A. If Ally borrows no capital, she can employ 800 hours of work. B. If Ally employs no workers, she can borrow $4 million of capital. C. If Ally employs 600 hours of work, she can borrow $1 million of capital. D. If Ally employs 400 hours of work, she can borrow $3 million of capital. E. The slope of the isocost line is -5.

13. Marissa owns a small lunch shop. The shop's kitchen is small, so it can only accommodate one worker at any one time. The shop is only open from 11:30am - 1:30pm each day. Which of the following options is Marissa the most likely to pursue if economic pressures lower the competitive wage she pays her worker by 5 percent? A. Borrow capital to triple the size of her kitchen. B. Hire a second worker. C. Extend her business hours. D. Shut down her shop. E. Raise her prices. 14. 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. 15. Labor demand is more elastic A. the greater is the supply elasticity of capital. B. the greater is the elasticity of substitution between labor and capital. C. the greater is the elasticity of demand for the firm's output. D. the greater is labor's share in total costs. E. All of the above. 16. Labor demand is more elastic the greater the elasticity of substitution between labor and capital because A. workers supply more labor when their wage increases. B. the firm's output price falls when the firm produces more output. C. a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital for labor. D. firms always have the option of substituting capital for labor. E. a firm's technology is slow to change. 17. Labor demand is more elastic the greater the elasticity of demand for the firm's output because Athe firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs . through to the consumer by increasing the price of the output good. B. the firm's output price falls when the firm produces less output. C. a firm that operates in a competitive output market cannot lower its price. D. capital is usually price elastic. E. the firm will want to hire fewer workers when the wage rate increases. 18. If unskilled labor and capital are substitutes, A. demand for unskilled labor increases when the price of capital decreases. B. the cross-elasticity between unskilled labor and capital is positive. C. the price of unskilled labor decreases when the price of capital increases. D. the price of capital is increasing. E. the demand curve for capital is upward-sloping. 19. From 1981 to 1989, the nominal federal minimum wage was unchanged. As a result: A. The real minimum wage increased because firms paid higher wages to attract workers over time. B. The real minimum wage decreased because firms substituted skilled labor for unskilled labor. C. The real minimum wage increased due to higher payroll taxes. D. The real minimum wage decreased over time due to inflation. E. The real minimum wage was unchanged as well.

20. At a wage of $25 per hour, the firm employs 50,000 hours of labor per week. If the wage would increase to $27 per hour, the firm would employ 45,000 hours of labor per week. What is the elasticity of labor demand? A. -2.50. B. -1.50. C. -1.25. D. -0.50. E. -0.25. 21. Consider the following hypothetical difference-in-differences results concerning the average of hours worked in "big-box stores" between North and South Dakota before and after North Dakota increased its minimum wage.

The minimum wage increase is associated with average hours of working decreasing by how much per week in North Dakota relative to South Dakota? A. 2.1 hours B. 11.7 hours C. 13.8 hours D. 15.9 hours E. 20.2 hours 22. For which reason is increasing the federal minimum wage not a good anti-poverty program? A. It is very costly for the government. B. Roughly two-thirds of minimum wage earners are not the primary worker in their household. C. Increasing the federal minimum wage will likely increase employment opportunities. D. The minimum wage discriminates against minorities. E. The minimum wage discriminates against the young. 23. 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. 24. 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 fires a worker. 25. If the minimum wage applies to one sector (the covered sector) but not another sector (the uncovered sector), an increase in the minimum wage in the covered sector is likely to result in which of the following? A. Greater employment in the covered sector. B. Less employment in the uncovered sector. C. A lower wage in the covered sector. D. A lower wage in the uncovered sector. E. Workers willingly leaving the covered sector for the uncovered sector in search of higher wages.

26. Firms usually face asymmetric variable adjustment costs because A. hiring costs are typically high. B. firing workers is relatively easy. C. firing workers can be difficult and costly for legal reasons. D. workers are reluctant to change jobs during a recession. E. firms vary in size. 27. 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. 28. The marginal rate of technical substitution at any particular labor-capital bundle is A. the slope of the isoquant. B. the average product of labor relative to the average product of capital. C. the wage relative to the cost of capital. D. the slope of the indifference curve. E. the ratio of labor to capital. 29. What is the most accurate description of the value of a worker to the firm? A. The wage. B. The firm's total output when holding capital fixed. C. The firm's average product when holding capital fixed. D. The dollar value of the worker's output. E. The dollar value of the average worker's output. 30. Why is the short-run labor demand curve less elastic relative to the long-run labor demand curve? A. Because firms care about changes in wages in the short-run but not in the long-run. B. Because firms are better able to substitute capital for labor in the long run compared to the short run. C. Because labor is a normal good. D. Because a perfectly competitive firm can always pay lower wages in the long run. E. Because isocost curves get shallower when the wage increases.

Chap 03_6e Key 1. D 2. C 3. C 4. E 5. B 6. A 7. C 8. E 9. C 10. B 11. B 12. D 13. C 14. E 15. E 16. C 17. A 18. B 19. D 20. C 21. B 22. B 23. E 24. C 25. D 26. C 27. E 28. A 29. D 30. B

Chap 03_6e Summary Category Borjas - Chapter 03

# of Question s 30

Chap 04_6e Student: ___________________________________________________________________________

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.

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.

Which of the following is likely to result in the least amount of dead weight loss? A. A payroll tax. B. Employer-provided health care insurance. C. A legislated minimum wage that is substantially above the competitive wage. D. A non-competitive labor market. E. A male-dominated society that doesn't allow young girls access to education.

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.

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.

A perfectly discriminating monopsonist pays each worker his or her reservation wage. This results in A. the firm receiving zero profit. B. the firm substituting capital for labor. C. the firm receiving all of the surplus. D. the firm avoiding payroll taxes. E. workers being unwilling to work at the offered wage.

Which of the following would prevent a single equilibrium wage existing across all labor markets? A. A competitive labor market. B. Workers having various skills and preferences. C. Firms being free to enter any of the labor markets. D. Potential workers being able to freely enter any of the labor markets. E. A payroll tax paid equally by workers and firms.

Many immigrants and many American high school dropouts possess very few skills. What impact will these low-skill immigrants likely have on the labor market opportunities of American high school dropouts? A. Immigration of low-skilled workers is associated with higher wages paid to American high school dropouts. B. Immigration of low-skilled workers is associated with lower wages paid to American high school dropouts. C. Immigration of low-skilled workers does not affect wages paid to American high school dropouts. D. Immigration of low-skilled workers is associated with greater employment among American high school dropouts. E. None of the above.

A profit-maximizing monopsonist A. pays the same wage to all types of labor. B. hires an equal number of male and female workers and pays them the same wage. C. hires more minority workers than non-minority workers, but pays the minority workers less than the non-minorities. D. hires fewer workers and pays its workers less than it would if it were operating in a competitive labor market. E. substitutes low-skilled labor for high-skilled labor in the long run.

10. Compared to the labor market outcome when there are no payroll taxes, imposing a payroll tax on labor will typically result in: A. Firms paying a higher wage. B. Workers receiving a lower wage net of taxes. C. A decrease in overall employment. D. An increase in dead weight loss. E. All of the above. 11. When the government imposes a payroll tax on employers (and not on workers), which of the following effects will not come about? A. The labor demand curve shifts down. B. Employment falls. C. Firms and workers typically both bear a portion of the tax. D. Real wages will remain fixed if the labor market is competitive. E. The costs of hiring increase. 12. When the government imposes a payroll tax on workers, A. the effects are identical to the effects had the government imposed the tax on employers. B. the costs of hiring remain constant. C. the labor supply curve shifts to the right. D. total employment remains constant. E. workers' real wages are unchanged. 13. If labor supply of unskilled workers is perfectly inelastic, then A. firms face an increasing marginal cost of hiring unskilled labor. B. firms face a horizontal value of marginal product of employment curve. C. the labor supply curve of unskilled workers is horizontal at the market clearing wage. D. the labor supply curve of unskilled workers is vertical at the total number of unskilled workers in the market. E. workers will supply more hours of labor to the market when wages increase.

14. Assuming a country has a constant returns to scale Cobb-Douglas production function, what effect will immigration have on native labor that has a high degree of substitutability with the immigrant labor? A. Immigration has no long-run effect on native wages. B. Immigration lowers native wages in the long run. C. Immigration raises the labor-capital ratio in the long run. D. Immigration has no short-run effect on native wages. E. Immigration has a negative effect on total employment in the short run. 15. If unskilled domestic labor and unskilled immigrant labor are substitutes in the production process, then a more open immigration policy will likely result in all but which of the following? A. The total market supply of unskilled labor shifts out. B. The market-clearing wage for unskilled labor decreases. C. Total employment of unskilled labor increases. D. The wage received by unskilled native workers decreases. E. The demand curve for unskilled labor shifts up (out). 16. Supposing that immigrant labor is complementary to native labor in the production process, a more open immigration policy will likely result in all but which of the following? A. Firms will value native labor more highly. B. The labor demand curve for native workers shifts out. C. Lower wages paid to native workers. D. Overall economic efficiency increases. E. Overall native employment increases. 17. Which of the following does not characterize a perfectly discriminating monopsonist? A. The firm's marginal cost of hiring curve is the labor supply curve. B. The firm hires more workers than it would if it were a competitive firm. C. The firm chooses employment and wage levels in order to maximize profit. D. The firm pays each worker his or her reservation wage. E. The labor supply curve can be upward sloping. 18. If a firm operates in a competitive labor market and in a non-competitive output market, then the firm faces A. a constant wage rate when hiring more labor and a constant price when selling more of its output. B. an increasing wage rate when hiring more labor but a constant price when selling more of its output. C. a constant wage rate when hiring more labor but a decreasing price when selling more of its output. D. an increasing wage rate when hiring more labor but a decreasing price when selling more of its output good. E. a decreasing wage rate when hiring more labor but a decreasing price when selling more of its output good. 19. Which is the distinguishing feature of the standard cobweb model? A. The firm is a perfectly discriminating monopsonist. B. Wages and employment levels adjust slowly over time. C. Payroll taxes create a tax wedge, which in turn increases overall employment levels. D. Real wages steadily increase. E. Capital is not fixed in the short run. 20. The standard cobweb model makes the following two assumptions: A. Workers are forward-looking, and job adjustments take time. B. Workers are myopic, and job adjustments take time. C. Workers are forward-looking, and job adjustments are instantaneous. D. Workers are myopic, and job adjustments are instantaneous. E. Workers are myopic, and retraining of one's skills happens instantaneously.

21. Suppose a law firm negotiates a very low price for each of its 1,000 employees to be members at the athletic club that is located next to the law firm. Which of the following is not likely to be true? A. The law firm can pay its workers less than a comparable law firm that does not offer the gym benefit. B. The firm can likely negotiate a lower per person price at the gym than each employee could negotiate alone. C. Some employees will take advantage of the gym benefit, while others will not. D. In the long run, the law firm will probably attract workers who value the gym benefit the most. E. If the typical individual gym membership costs $50 per month, the law firm should expect to save $50,000 per month in wages. 22. Which of the following would result in a short-run increase in the wage rate in a competitive labor market? A. An increase in immigration. B. An increase in the output price. C. A decrease in productivity. D. An increase in native labor supply. E. A decrease in labor demand. 23. 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. 24. Which one of the following statements is true? A. A monopolist is necessarily a monopsonist. B. A monopsonist is necessarily a monopolist. C. A monopsonist is a perfectly discriminating monopolist. D. Firm surplus always exceeds worker surplus. E. None of the above statements are true. 25. Which of the following is not an accurate summary of the equilibrium associated with a single competitive labor market? A. Firms receive surplus equal to the area above the wage rate and below the demand for labor. B. Workers receive surplus equal to the area below the wage rate and above the supply of labor. C. All workers are paid the same market-clearing wage. D. Total firm surplus equals total worker surplus. E. Total economic surplus is maximized. 26. If labor is supplied perfectly inelastically, the imposition of a payroll tax legislated to be paid by firms will do all of the following except: A. Reduce the wage rate by exactly the amount of the tax. B. Leave employment levels unchanged. C. Leave firm profits unchanged. D. Reduce total output. E. Generate tax revenue paid to the government. 27. If immigrant workers are complementary to native workers, then A. native workers will be better off with open borders. B. immigrant workers will receive a higher wage than native workers. C. immigration will shift the demand for native labor to the left. D. there will be no immigration surplus. E. each firm will hire only immigrants or only natives but not a mixture of the two.

28. 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. 29. A monopsonist is A. a firm with partial control over an industry. B. a firm operating in a regulated industry. C. a firm that is the single purchaser of a factor of production. D. a firm that competes for labor but sells its output in a non-competitive market. E. a group of firms, much like a cartel, that restricts the demand for labor in a market. 30. A perfectly discriminating monopsonist A. pays the equilibrium wage to all workers. B. pays each worker his or her reservation wage. C. receives zero profit in the long run. D. disregards minimum wage laws. E. faces an increasing value of marginal product curve.

Chap 04_6e Key 1. D 2. E 3. B 4. E 5. D 6. C 7. B 8. B 9. D 10. E 11. D 12. A 13. D 14. A 15. E 16. C 17. B 18. C 19. B 20. B 21. E 22. B 23. C 24. E 25. D 26. D 27. A 28. E 29. C 30. B

Chap 04_6e Summary Category Borjas - Chapter 04

# of Question s 30

Chap 05_6e Student: ___________________________________________________________________________

Under normal circumstances, the equilibrium compensation wage differential is the wage differential that exactly attracts A. the average worker into a regular job. B. the marginal worker into a risky job. C. the average worker into a less risky job. D. the marginal worker into the labor market. E. the average high-skilled worker into a low-skill job.

In order for the compensating differential associated with a risky job to be negative (so that a risky job pays less than a non-risky job), it must be that A. many workers are willing to work the risky job for free. B. most workers prefer the risky job to the safe job when both wages are equal. C. the number of risky jobs is less than the number of workers who prefer the risky job. D. there is great demand for labor in both sectors. E. the government mandates that the wages in the two sectors be equal.

Ability bias can arise when estimating compensating wage differentials associated with various job characteristics. What is ability bias in this context? A. Low-skilled workers are likely to have low wages but good job amenities. B. High-skilled workers are likely to have high wages but poor job amenities. C. High-skilled workers are likely to have lower wages than unskilled workers but to have better job amenities. D. High-skilled workers are likely to have higher wages than unskilled workers but to have worse job amenities. E High-skilled workers are likely to have higher wages than unskilled workers, but they are also likely to . trade some of their higher wages for better job amenities.

In order to get rid of ability bias when estimating the compensating differential associated with various jobs, one should look at A. wages for particular workers who never change jobs over time. B. wages for particular workers who change jobs over time. C. wages for particular industries over time. D. wages for particular industries over various jobs within the industry. E. the average wages paid by different firms within the same industry.

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.

In the standard theory of compensating differentials, a worker's reservation price is A. the amount of money it takes to entice the worker into accepting a risky job. B. the amount of money it costs a worker to take a risky job. C. the amount of money a worker loses for not taking any job. D. the amount of money it costs a worker to take a safe job. E. the difference between the wage paid in firms offering risky jobs and the wage paid by firms offering safe jobs.

The supply curve of labor to risky jobs reveals. A how many workers are willing to offer their labor to the risky job as a function of the wage differential . between the risky job and the safe job. B. how many workers are willing to offer their labor to the risky job as a function of the wage paid to workers of the risky job. C. how many workers are willing to offer their labor to the safe job as a function of the wage paid to workers of the risky job. D. the number of workers who dislike risky jobs. E. the fraction of workers who dislike risky jobs.

The correlation between wages and the probability of encountering a fatal injury while on the jobs can be used to calculate: A. the value of risk. B. the value of safety. C. the value of life. D. the value of injury. E. the value of work.

Workers with high earnings potential are likely to earn more and to have better working conditions than workers with low-earnings potential. This positive correlation between earnings and working conditions: A. makes it easy to find evidence that workers trade off some earnings in exchange for better working conditions. B. makes it difficult to find evidence of compensating wage differentials associated with working conditions. C. suggests low-skill and high-skill workers have similar working conditions. D. suggests high-skill workers are typically overpaid. E. suggests low-skill workers are more efficient per dollar paid in wages plus fringe benefits than are high-skill workers.

10. Assume that the market clearing wages are $10 per hour in a safe job and $18 per hour in a risky job. Then, at the completion of a war, many ex-soldiers who enjoy risky ventures enter the labor market. Which of the following is not a likely outcome of this change? A. Many firms that currently offer risky jobs will begin offering safe jobs. B. The fraction of people working safe jobs will decrease. C. The wage associated with risky jobs will decrease. D. The number of people working risky jobs will increase. E. The wage differential will decrease. 11. Abby's reservation price for working in a risky job is $5 per hour while Rudy's reservation price for working in a risky job is $8 per hour. Characterize Abby and Rudy's job selections if safe jobs pay $12 per hour and risky jobs pay $18 per hour. A. Abby and Rudy both work a safe job. B. Abby works a safe job while Rudy works a risky job. C. Abby works a risky job while Rudy works a safe job. D. Abby and Rudy both work risky jobs. E. Rudy works a risky job while Abby doesn't care which type of job she works. 12. 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. install the safety equipment if workers are willing to be paid $3 per hour less in a clean job than in a dirty job. C. never willingly choose to install the costly safety equipment. D. never install the safety equipment without a government subsidy to do so. 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.

13. 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. 14. A hedonic wage function could be applied to which of the following job characteristics? A. The probability of being injured on the job. B. The degree to which a job involves monotonous work. C. The degree to which the area surrounding the job location is safe. D. The degree to which a job involves strenuous work. E. All of the above can be represented with a hedonic wage function. 15. 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. 16. Estimates of the compensating wage differentials associated with particular job characteristics are valid only if A. all other factors that influence worker's wages are held constant. B. non-wage characteristics of the job are allowed to vary by sector. C. firms are willing to pay higher wages to more skilled workers. D. the compensation wage equals the worker's marginal cost. E. the firm provides non-pecuniary compensation for risks that workers encounter on the job. 17. Suppose 1 in 80 workers die on the job each year in Copper's Coal Mine, while 1 in 75 workers die on the job each year in Silver Creek Coal Mine. Moreover, the average salary is $70,000 at Copper's Coal Mile and is $72,000 at Silver Creek Coal Mine. Given this information, what is the implied statistical value of a life of a miner? A. $2,000 B. $70,000 C. $480,000 D. $1,200,000 E. $2,400,000 18. A standard hedonic wage function might show what relationship? A. The relationship between the wage and a worker's age. B. The relationship between the wage and a worker's race. C. The relationship between the wage and a worker's gender. D. The relationship between the wage and the probability of injury faced by the worker. E. The relationship between the wage and a worker's skill level. 19. When a worker and firm are matched on the hedonic wage function, it is implied that A. the worker cannot receive a higher wage at any other firm. B.the worker-firm match is efficient in the sense that neither the worker nor the firm could become better off with a different match. C. the firm could increase its profits by offering a safer job as doing so would allow the firm to lower the wage it pays. D. the hedonic wage function must be very steeply sloped to ensure that the worker doesn't accept a better paying job. E. the worker receives no surplus from the match.

20. When graphing a worker's indifference curves in Probability of Injury (x-axis) versus Wage (y-axis) space, Al's indifference curves are steeper than Pete's indifference curve. In this case: A. Al is more risk-loving than Pete. B. Al requires a greater wage increase than Pete in order to willingly take on more risk. C. Al will end up receiving a higher wage than Pete. D. Both are risk neutral. E. Al will only accept a job if it offers no risk of injury. 21. 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. 22. Having the government regulate work-place safety would most likely improve economic efficiency if A. the cost of introducing safety equipment is high. B. workers value safe work environments. C. workers are unable to correctly judge the risk associated with a particular job. D. firms are unable to attract workers to safe jobs. E. firms and workers differ on the value they place on safe versus risky jobs. 23. The equilibrium hedonic wage function is most likely A. horizontal as no firm will over-pay for workers. B. horizontal as firms will choose their optimal level of safety. C. a single point, as all firms will choose the same level of risk, and consequently all workers will be paid the same wage. D. upward sloping as firms that offer riskier jobs usually pay higher wages. E. downward sloping as firms that offer riskier jobs are usually able to pay lower wages. 24. 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. 25. 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. 26. Assuming that workers are fully aware of their working conditions, which of the following will not happen when the government mandates pollution control to protect workers' health? A. Worker utility will increase. B. Employment will decrease. C. The air in workplaces will become cleaner. D. Firms with low-profits before the mandate may shut down or exit the industry. E. Wages will fall at all but the cleanest firms.

27. Risk-averse workers A. have shallow wage-risk indifference curves when risk is graphed on the x-axis. B. are willing to work in riskier environments for a relatively low increase in the wage. C. are willing to accept large wage decreases in exchange for a safer work environment. D. never work in risky environments. E. are more productive than risk-loving workers. 28. The wage differential between a safe and risky job is $5,000. Which of the following is not true? A. The marginal worker is indifferent between working the safe or risky job. B. All but the marginal worker in safe jobs require a wage differential above $5,000 to accept a risky job. C.All but the marginal worker in the risky job require a wage differential below $5,000 to be indifferent between safe and risky jobs. D. The per-worker cost for any firm to change technologies to offer safe jobs in place of risky jobs is $5,000. E. The average per worker cost of offering safe jobs exceeds $5,000 at the risky firms. 29. 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. 30. The value of life is calculated by comparing A. wages to risk levels. B. risk levels to the number of children in a worker's household. C. wages to the number of children in a worker's household. D. average life expectancy by occupation to average risk levels by industry. E. average wages to the average retirement age.

Chap 05_6e Key 1. B 2. C 3. E 4. B 5. E 6. A 7. A 8. C 9. B 10. A 11. C 12. E 13. D 14. E 15. C 16. A 17. E 18. D 19. B 20. B 21. D 22. C 23. D 24. D 25. C 26. A 27. C 28. D 29. C 30. A

Chap 05_6e Summary Category Borjas - Chapter 05

# of Question s 30

Chap 06_6e Student: ___________________________________________________________________________

The wage-schooling locus is A. downward sloping because education is generally productive. B. upward sloping because education is generally productive. C. backward bending. D. horizontal because wages are unrelated to schooling. E. vertical because education is a public good.

The slope of the wage-schooling locus provides an estimate of A. the average years of education as a function of age. B. the average wage or salary of workers for a given level of schooling. C. the economic return to an additional year of schooling. D. the economic cost of an additional year of schooling. E. the marginal cost of an additional year of schooling.

Present value calculations allow one to determine A. the return to an uncertain asset. B. the present-day costs and/or benefits of various options. C. the utility value of a particular option. D. the social cost of financial calculations. E. the real wage.

Which of the following reasons is not a likely explanation as to why college completion rates are greater, on average, for whites than for blacks? A. Tuition costs are lower for whites than blacks. B. Whites have access to more financial capital to pay for college than blacks. C. Post-college wages are higher for whites than for blacks. D. Whites have greater access to higher quality public education at the elementary and secondary level. E. Whites are more able to postpone earnings at age 18 than are blacks.

What does not enter into the present value calculation of a college degree? A. The cost of college tuition. B. The cost of books. C. Wages of college graduates. D. Lifetime wages of non-college graduates. E. The value of one's scholarships.

What is an example of specific job training? A. Learning word-processing skills. B. Learning how to use the firm's payroll system. C. Obtaining a GED. D. Becoming stronger. E. Passing the CPA exam.

What is an example of general job training? A. Learning how to use a forklift. B. Learning how to weld. C. Reading a book on techniques for managing large groups of workers involved on team projects. D. Attending an industry convention on "best practices." E. All of the above.

Why is it that a firm will typically not pay for general training? A. General training is free. B. General training is too expensive. C. The benefits of general training depreciate quickly. D. General training usually doesn't increase worker productivity. E. The skills gained from the general training are transferable to other firms.

Paula is considering going to law school. If she does, she will spend $60,000 on tuition and books to get a college education (during the first time period), $120,000 on tuition and books to get a law degree (during the second time period), and her law degree will earn her $620,000 during the remainder of her work-life (during the third time period). Paula's time preference for money is associated with a per-period interest rate of 20 percent. Approximately what is Paula's present value of obtaining a law degree? A. $100,100 B. $210,400 C. $270,500 D. $440,000 E. $621,900

10. What is the stopping rule for choosing one's years of schooling? A. End one's schooling when the return from more schooling is zero. B. End one's schooling when the cost of one more year of schooling is zero. C. End one's schooling after college. D. End one's schooling when the rate of return to one more year of schooling equals the worker's rate of discount. E. End one's schooling when the worker's rate of discount equals zero. 11. 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. 12. Human capital refers to A. the amount of financial capital owned by firm owners. B. the amount of financial capital owned by workers. C. the amount of physical capital a firm owns (per worker it employs). D. the unique set of abilities and skills embedded in workers. E. the amount of physical capital produced by labor. 13. 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. 14. What is implied when the wage-schooling profile is drawn as a concave (i.e., increasing at a decreasing rate) function? A. The marginal return to schooling increases as years of schooling increases. B. The marginal return to schooling is positive but falling as years of schooling increases. C. Average wages fall as years of schooling increases. D. The cost of schooling increases, but at a decreasing rate. E. The cost of schooling decreases, but at an increasing rate.

15. Which statement about human capital is false? A. Human capital gives firms a way to differentiate between workers. B. Workers accumulate human capital during formal education and through life experiences. C. There is more human capital in the U.S. now than there was 100 years ago. D. Human capital has a low rate of return. E. Human capital tends to be an important determinant of one's wages. 16. People decide how much schooling to receive based on: A. Their discount rate. B. The marginal rate of return to schooling. C. The present value of expected future earnings. D. Their ability to succeed in education programs. E. All of the above factors influence how much schooling one receives. 17. In order to use schooling as a signal: A. The signal must be more costly for low-skilled workers than for high-skilled workers. B. The cost of purchasing the signal must not be so costly that high-skilled workers don't value obtaining it. C. Firms must be able to easily verify each worker's amount of schooling. D. Some people must choose to not complete schooling. E. All of the above are required for schooling to serve as a signal. 18. 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. 19. 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. When schooling is not used as a signaling device, how much is the firm willing to pay a worker chosen at random? A. $30,000 B. $34,000 C. $38,000 D. $42,000 E. $50,000 20. 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 21. 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.

22. Temporary layoffs are common in the United States especially among workers who are heavily invested with specific training. Why? A. Specific training deteriorates quickly, so a laid-off worker with specific training is not valuable to any firm. BThe laid-off worker with specific training is more valuable to the firm that laid her off than she is to any . other firm. Thus, it is in the worker's best interest to remain unemployed until recalled to work at her original firm. C. Workers without specific training are never hired in the first place. D. Workers with specific training know they don't need to work hard when employed. E. Unemployment benefits are tied to specific training. 23. The social rate of return to schooling A. includes all private benefits to schooling. B. includes the signaling benefits to schooling. C. includes the increase in national income resulting from education. D. does not take into account the costs of education. E. are always well defined. 24. 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. 25. Suppose all 18-year-olds are identical in every way except that some have easy access to credit (i.e., they face a low interest rate when borrowing money) while others have a difficult time accessing credit (i.e., they face a high interest rate when borrowing money). Which of the following statements is not true? A. Those who have easy access to credit have a lower rate of discount than those who do not have easy access to credit. B. Those who have easy access to credit will be more likely to go to college than those who do not have easy access to credit. C The present value calculation of college will be higher for those who have easy access to credit than for . those who do not have easy access to credit. D. Some people who have easy access to credit will not go to college. E. No one without easy access to credit will go to college. 26. The Mincer earnings function is used to estimate A. ability bias. B. the signaling effect. C. the social return to schooling. D. the value of the marginal product of labor. E. the age earnings profile. 27. Which group of workers tends to have the highest unemployment rate among high school dropouts? A. Men B. Women C. Blacks D. Hispanics E. Whites 28. Time out of the labor force reduces current earnings as well as future earnings. This suggests that A. general training does not exist. B. on-the-job experience is a form of human capital. C. firms will not invest in specific job training. D. workers never willingly exit the labor force when young. E. productivity is unrelated to job experience.

29. Approximately what percent of people in the United States typically do not graduate from high school? A. 2% B. 5% C. 10% D. 15% E. 20% 30. Approximately what percent of people in the United States typically receive more education than just a high school degree? A. 15% B. 25% C. 50% D. 65% E. 90%

Chap 06_6e Key 1. B 2. C 3. B 4. A 5. D 6. B 7. E 8. E 9. C 10. D 11. E 12. D 13. A 14. B 15. D 16. E 17. E 18. B 19. C 20. D 21. C 22. B 23. C 24. B 25. E 26. E 27. C 28. B 29. D 30. C

Chap 06_6e Summary Category Borjas - Chapter 06

# of Question s 30

Chap 07_6e Student: ___________________________________________________________________________

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.

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%

In the United States, the wealthiest 10 percent of households earn approximately what share of total income? A. 5% B. 10% C. 30% D. 50% E. 80%

Higher values of the Gini coefficient are associated with A. greater education inequality. B. greater income inequality. C. less income inequality. D. greater labor mobility. E. less labor mobility.

In general terms, which of the following statements regarding changes in income inequality in the United States is correct? A Inequality has increased over the last 30 years as witnessed by the Gini coefficient increasing from . about 0.1 in 1970 to about 0.7 in 2000. B Inequality has increased over the last 30 years as witnessed by the Gini coefficient increasing from . about 0.3 in 1970 to about 0.45 in 2000. C Inequality has decreased over the last 30 years as witnessed by the Gini coefficient decreasing from . about 0.5 in 1970 to about 0.05 in 2000. D Inequality has decreased over the last 30 years as witnessed by the Gini coefficient decreasing from . about 0.8 in 1970 to about 0.25 in 2000. E. Inequality has stayed about the same over the last 30 years as witnessed by a Gini coefficient that has hovered around 0.6.

The Gini coefficient in a perfectly unequal society will have a Gini coefficient of _____ while a perfectly equal society will have a Gini coefficient equal to _____. A. 0; 1 B. 1; 0 C. 0; infinity D. infinity; 0 E. -1; 1

Wage differentials across individual workers are determined in part by: A. Effort. B. Productivity. C. Social capital. D. Luck. E. All of the above.

Which of the following is not a possible explanation as to why wage inequality increased markedly over the last 40 years in the United States? A. There was an increase in the supply of low-skill workers, particularly through immigration. B. Federal legislation allowed employers to legally engage in more racial discrimination. C. Competition from international economies has increased demand for highly productive workers. D. Recent technological changes have been complementary to skilled labor (while substituting for unskilled labor). E Institutional changes in the United States such as a steady decline in union coverage and a falling real . minimum wage have led to changes in the wage distribution.

From 1965 to 2005, the 90-10 wage gap in the United States has A. held constant at roughly 100. B. held constant at roughly 200. C. held constant at roughly 200 until 1980 and has steadily increased to about 400 since then. D. held constant at roughly 200 until 1980 and has steadily decreased to under 100 since then. E. increased steadily from 200 in 1960 to over 500 in 2000.

10. The positive correlation between ability and human capital investments "stretches out" wages in the population, generating what? A. A positively skewed wage distribution. B. A negatively skewed wage distribution. C. An inconsistent wage distribution. D. A uniform wage distribution. E. A symmetric wage distribution. 11. What does the Gini coefficient measure? A. The rate of growth of income inequality over time. B. The degree of inequality in an income distribution. C. The correlation coefficient between income and education. D. The covariance of income and education. E. The degree of tax incidence paid by poor workers. 12. 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. 13. Which of the following does not measure inequality? A. The 90-10 wage gap. B. The 50-10 wage gap. C. The Gini coefficient. D. The actual Lorenz curve. E. The perfect-equality Lorenz curve.

14. What is meant by the skill-bias technological explanation of increasing inequality? A. There has been increasing inequality over the last 40 years because unskilled workers use no technology. B. There has been increasing inequality over the last 40 years among high-skilled workers. C. Inequality has increased because technological advances have not kept pace with the demand for education. D Inequality has increased because technological advances over the last 40 years have complemented the . productivity of skilled labor relative to unskilled labor. E Inequality has increased because technological advances over the last 40 years have complemented the . productivity of unskilled labor relative to foreign labor. 15. Suppose the distribution of innate ability is distributed symmetrically throughout a population but that the wage distribution is positively skewed. What most likely explains this? A. A regressive tax code. B. Decreased immigration. C. Differences in human capital accumulation. D. A decreasing Gini coefficient. E. A non-competitive labor market. 16. Which of the following measures would best allow one to compare the relative wealth of poor households to the typical household in an economy? A. The perfect-equality Lorenz curve. B. The Gini coefficient. C. The 90-10 wage gap. D. The 50-10 wage gap. E. The 90-50 wage gap. 17. Expansions in globalization and the reduction of trade barriers world-wide during the 1980s and 1990s most likely had what effect on the demand for U.S. labor? A. The demand for unskilled workers increased, while the demand for skilled workers decreased. B. The demand for unskilled workers decreased, while the demand for skilled workers increased. C. The demand for unskilled and skilled workers increased. D. The demand for unskilled and skilled workers decreased. E. The demand for unskilled workers increased, while the demand for skilled workers didn't change. 18. 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. 19. Consider an economy with a particular distribution of income. Over the next 10 years, the income of all households increases by $20,000. How will the Gini coefficient change over those 10 years? A. The Gini coefficient will increase. B. The Gini coefficient will decrease. C. The Gini coefficient will stay the same as all households received the same increase in income. D. The Gini coefficient will become more negative. E. It is impossible to determine how the Gini coefficient will change as it will depend on the original income distribution.

20. Large disparities in wages could possibly result from all but which one of the following? A. Parental investment in a child's human capital. B. Increases in the amount of middle class jobs. C. Skill-biased technological change. D. Globalization. E. An increase in the demand for highly skilled labor. 21. All but which one of the following statements about the Gini coefficient is 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. 22. What is the approximate Gini coefficient associated with the following income distribution?

A. 0.08 B. 0.13 C. 0.23 D. 0.34 E. 0.48 23. What is the 50-10 wage gap if the 10th percentile wage is $25,000; the 50th percentile wage is $62,000; and the 90th percentile wage is $95,000? A. 0.52 B. 0.75 C. 1.48 D. 2.25 E. 2.78 24. An approximate Lorenz curve shows A. the maximum and minimum wage gaps. B. the relationship between income and tax revenue. C. the share of income received by age group. D. the relationship between income and earnings potential. E. the cumulative share of income earned by quintiles of households. 25. The earnings distribution refers to the distribution of A. wages or earnings in an economy. B. earnings over an individual's life. C. wages between races. D. wages between genders. E. wage offers throughout an economy. 26. The superstar phenomenon explains why A. some people are paid extraordinary sums of money for talents that many people have. B. a few people are paid extraordinary sums of money for extreme talents that only a few people have. C. most people are paid relatively modest sums of money for talents that just a few people have. D. superstars have talents that far exceed even the next best person in the field. E. there are fewer superstars with the passing of time.

27. 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. 28. Variation in wages across individuals is called A. wage dispersion. B. the mean wage. C. the Gini coefficient. D. the perfect-equality Lorenz curve. E. the positively-skewed wage distribution. 29. 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. 30. How does the income distribution in the United States compare to other developed countries? A. The income distribution is vastly more unequal in the United States compared to other developed countries. B. The income distribution is vastly more equal in the United States compared to other developed countries. C The income distribution tends to be more unequal in the United States compared to other developed . countries, but not by a huge amount. D The income distribution tends to be more equal in the United States compared to other developed . countries, but not by a huge amount. E.The income distribution must be the same in all developed countries, the United States included, because of increased globalization.

Chap 07_6e Key 1. A 2. A 3. C 4. B 5. B 6. B 7. E 8. B 9. C 10. A 11. B 12. B 13. E 14. D 15. C 16. D 17. B 18. C 19. B 20. B 21. D 22. D 23. C 24. E 25. A 26. B 27. C 28. A 29. B 30. C

Chap 07_6e Summary Category Borjas - Chapter 07

# of Question s 30

Chap 08_6e Student: ___________________________________________________________________________

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. Government spending.

Which of the following statements about migration is not true? A Migration is greater among younger workers compared to older workers, because older workers have a . shorter period in which to benefit from the returns to migration. BMigration is greater among highly educated workers compared to less educated workers, because the . returns to education for highly-educated workers vary much more from location to location than for workers with low levels of education. C Migration is greater among married couples compared to single-person households, because migration . costs are less for married couples. D. A tied-stayer is someone who would move if he or she were single. EMigration is greater among people who like the adventure of moving compared to people who do not . like the adventure of moving, because the psychic costs of moving are less for those who enjoy moving.

Which is not a factor that generates return and/or repeat migration flows? A. A worker realizes after the move that he or she miscalculated labor market opportunities in the new location. B. A worker realizes after the move that he or she does not like the weather in the new location. C. A worker moved initially in order to move up the career ladder in his or her company. D. A worker lands a job after the move that pays him or her a wage much greater than originally expected. E.A worker realizes after the move that the monetary and psychic costs of moving are not as large as he or she originally calculated.

Suppose there is currently positive selection of immigrants to the United States. What would happen to immigration to the U.S. if the return to skills were to fall in the United States? A. The same selection of immigrants would continue to come to the United States. B. The selection of immigrants to the United States would switch from being positive to being negative. C. The selection would remain positive but with more workers immigrating to the United States. D. The selection would remain positive, but the average skills of immigrants would fall. E. The selection would remain positive, but the average skills of immigrants would increase.

Assuming labor demand is downward sloping and that the labor market is competitive, what happens to national income as a result in immigration? A. National income increases by more than the total earnings of immigrants. B. National income increases by less than the total earnings of immigrants. C. National income decreases by more than the total earnings of immigrants. D. National income decreases by less than the total earnings of immigrants. E. Immigrants have no effect on national income because they are not citizens.

Which of the following is a sign of a well-functioning labor market? A. A high degree of labor mobility (job losses and job gains). B. A constant unemployment rate. C. Equal pay for all workers. D. Equal pay in all regions. E. All workers have a college education.

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.

Which of the following is not likely to prevent some people from migrating? A. Some people face high financial costs associated with migrating. B. Some people don't want to leave their family and friends. C. Having a spouse who has a very well-paying job in the current location. D. Having a lucrative job offer in a different city. E. Having a teenage child who does not want to change high schools.

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.

10. 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. 11. If the supply of unskilled domestic labor and the supply of unskilled immigrant labor are both perfectly inelastic, then the typical market equilibrium will be such that: A. Immigrant labor will replace domestic labor. B. The perfectly inelastic supply of unskilled domestic labor will prevent the hiring of any unskilled immigrant labor. C The post-immigration equilibrium will be associated with lower wages being paid to the unskilled . immigrants compared to the wages paid to unskilled domestic labor. D. Wages paid to unskilled domestic labor will be less under immigration than under no immigration. E. Labor demand will shift out with increased immigration. 12. If the supply of unskilled domestic labor and the supply of unskilled immigrant labor are both perfectly inelastic, then the immigration surplus to the domestic economy can be estimated by: A. The number of immigrants times the new wage rate. B. The total number of workers under immigration times the difference in the old and new wage rates. C. One half of the number of immigrants times the new wage rate. D. One half of the number of immigrants times the difference in the old and new wage rates. E. National income minus government spending on immigration programs.

13. Negative selection in a migration model means that A. immigrants from the source country are highly skilled relative to labor in the destination country. B. immigrants from the source country are not highly skilled relative to labor in the destination country. C. all workers in the source country would earn a higher return on their skills if they would remain in the source country. D.all workers in the source country would earn a higher return on their skills if they would not immigrate to the destination country. E. anyone in the source country who can afford the cost of migrating to the destination country will do so. 14. Which of the following statements is associated with the standard migration model? A. Return migration signals that the mover regrets having made the initial move. B. Repeat migration signals that the mover regrets having made the initial move. C. Repeat migration signals that the mover is moving for job-related reasons. D. The decision to move is expected to increase the household's overall utility. E. Moving for job reasons is done at the expense of family desires. 15. The Roy model concerns A. the skill-selection associated with immigration flows. B. specific on-the-job training. C. general training. D. the age-earnings profile. E. the cost-benefit analysis of layoffs or quits. 16. The human capital externality refers to A. an additional tax placed on institutions of higher learning. B. the government's subsidization of institutions of higher learning. C. the quality of the environment in which a child is raised. D. the cohort affect from selection bias. E. the environmental costs associated with rapid population growth. 17. The distribution of skills is the same in Low Rock as it is in High Rock. The return to each unit of skill is the same in Low Rock, regardless of how much skill one has. The returns to skill in High Rock, however, depend on one's skill level. Workers at the low end of the skill distribution in High Rock receive very little return on their skills (less than they would receive in Low Rock), while workers at the high end of the skill distribution in High Rock receive a very high return on their skills (more than they would receive in Low Rock). Assuming that people are free to migrate from Low Rock to High Rock but not the other way around, the Roy model predicts which of the following outcomes? A. The average skill level in Low Rock will increase, while the average skill level in High Rock will decrease. B. The average skill level in Low Rock will decrease, while the average skill level in High Rock will increase. C. The average skill level in Low Rock will remain unchanged, but the average skill level in High Rock will increase. D. The average skill level will increase in both locations. E. The average skill level will decrease in both locations. 18. In a standard Roy model, migration can lead to an increase in average skills in both locations. What is necessary for this to happen? AThe workers who migrate from the source country are below-average in skill relative to the average . source country person but are above-average in skill relative to the average destination country person. BThe workers who migrate from the source country are above-average in skill relative to the average . source country person but are below-average in skill relative to the average destination country person. C. The highest skilled workers migrate from the source country to the destination country. D. The lowest skilled workers migrate from the source country to the destination country. E. Migration leads to an increase in average skills in both locations whenever there is positive selection.

19. Suppose the age-wage profile of immigrants has been increasing over time. That is, the age-wage profile of immigrants in the 1990s is higher than the age-wage profile of immigrants in the 1980s, which is in turn higher than the wage-age profile of immigrants in the 1970s. In this case, if one uses cohort analysis to estimate the age-wage profile of immigrants, which of the following is possible to find: A. A negative return to moving costs. B. A horizontal age-wage profile. C. A positively skewed wage distribution. D. A negatively skewed wage distribution. E. Negatively selected immigration. 20. If a two-person household moves from Miami to Atlanta, which of the following can describe the household? A. Both members of the households are tied movers. B. One member of the household is a tied stayer. C. One member of the household is a tied mover while the other is a tied stayer. D. Neither member of the household is a tied mover. E. Neither member of the household is a tied stayer. 21. Suppose an economy exhibits general conditions of downward sloping labor demand, upward sloping supplies of domestic and immigrant labor, and a competitive labor market. Which of the following is not a likely outcome of immigration? A. Domestic workers will experience some job losses. B. Domestic workers who keep their job will experience an increase in earnings. C. The market clearing wage will fall. D. Economic surplus will increase in the destination country, even net of immigrant earnings. E. Some economic surplus will transfer from domestic workers to domestic firms. 22. Compared to older workers with several years of experience with one firm, newly hired young workers typically A. have higher turnover. B. have more on-the-job training. C. have more experience. D. are likely to stay with their job longer. E. tend to earn more than their experienced colleagues. 23. Specific job training A. allows for more inter-industry job mobility. B. raises entry level wages for the untrained. C. leads to lower turnover. D. discourages workers from earning seniority. E. leads to a greater willingness by firms to lay off workers. 24. A couple is considering moving to Tampa from Chicago. The cost of moving for Crystal is $300 while the cost of moving for Amelia is $600. Crystal earns $500 in Chicago and $550 in Tampa. Amelia earns $200 in Chicago and $1000 in Tampa. Will they move as a couple? A. Yes, because they would earn $1,550 in Tampa but only $700 in Chicago. B. Yes, because they receive a net gain of $150 by moving to Tampa. C. Yes, because the joint cost of moving ($900) exceed what they could earn in Chicago ($700). D. No, because they would lose $50 by moving to Tampa when all benefits and costs are taken into account. E. No, because neither person would choose to move to Tampa on their own. 25. When a firm pays higher wages, it is likely that doing so will A. increase turnover. B. lower the firm's ability to attract high-skill workers. C. encourage workers to stay on the job for a long time. D. decrease worker utility. E. decrease the quality of the potential worker pool.

26. The standard model of geographic migration suggests: A. Migration occurs when there is a good chance that a worker will gain back his costs of moving. B. Increases in migration costs reduces the gains to migration. C. Improvements in economic opportunities in the current region of residence discourage migration. D. Improvements in economic opportunities in a possible region of residence encourage migration. E. All of the above statements are true. 27. 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. 28. 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. 29. Which of the following statements about self-selection and immigration flows into the United States is false? AIf the flow of immigrants is currently positively selected, increasing the costs to immigration will likely . make the future flow of immigrants even more positively selected. B. Negative selection results in low skilled workers coming to the United States. C. High-skilled workers in foreign countries will not always choose to migrate to the United States. D. Negative selection occurs when the United States offers a greater return to skill at high skill levels than the source country. E. Positive selection results in highly skilled workers coming to the United States. 30. 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.

Chap 08_6e Key 1. E 2. C 3. D 4. E 5. A 6. A 7. B 8. D 9. B 10. E 11. D 12. D 13. B 14. D 15. A 16. C 17. B 18. A 19. B 20. E 21. B 22. A 23. C 24. D 25. C 26. E 27. C 28. A 29. D 30. D

Chap 08_6e Summary Category Borjas - Chapter 08

# of Question s 30

Chap 09_6e Student: ___________________________________________________________________________

The perceived cost of hiring a black worker for an employer who is prejudiced against blacks will exceed A. the cost of hiring whites. B. the wage of whites. C. the wage of blacks. D. the white-black wage gap. E. total profit.

Owners of men's clothing stores traditionally discriminate against males when making hiring decisions because they believe that male customers are more eager to buy clothing from female associates. In reality, however, one's sex does not affect one's sales (i.e., one's sex does not affect one's productivity). Discrimination of this sort throughout the labor market has resulted in clothing stores paying male associates lower wages than they pay female associates. A new men's clothing store enters the industry without these prejudicial beliefs. Which of the following outcomes is not likely to come about? A. The new store will hire more male associates than the typical existing store. B. The new store will make greater profit than it would if it would hold similarly biased views. C. The new store will have lower per-employee labor costs than existing stores. D. The new store will likely have lower prices than existing stores. E. The new store will have to hire female associates to compete with its competition.

Economic theory suggests that discriminating employers will be driven from the marketplace when the output market is competitive. Why? A. Customers will refuse to purchase from a discriminating employer. B. Workers will refuse to work for a discriminating employer. C. The government mandates that the employer not act on his or her desire to discriminate. D Discrimination imposes an additional cost on the employer; and high-cost firms are eventually driven . out of a competitive output market. E. A competitive output market requires all workers to be paid the same wage.

Which one of the following statements concerning employee discrimination is not true? A. Employers have no reason to employ a segregated workforce if there is employee discrimination. B. Employee discrimination does not affect the profitability of firms as long as firms can employ segregated work forces. C Discriminating employees act as if their wage is less than it actually is if they are employed by a firm . that has an integrated workforce. D. Workers accept the utility-maximizing job offer even when there is employee discrimination. E. Employee discrimination will not produce a wage differential between equally skilled black and white workers.

Suppose the value of marginal product is $20 per hour regardless of race. An employer who faces an hourly wage of $14 per black worker and $17 per white worker decides to hire all white workers. What kind of discrimination is this? A. Employee discrimination. B. Consumer discrimination. C. Employer discrimination. D. Statistical discrimination. E. None of the above.

The Human Resources department at a firm has two job candidates for one position. Both candidates went to the same college, took the same classes and have the same academic record. They both performed well in the interview and said that they see the job as a long-term position. One applicant is male; the other is female. Historically within the firm, women quit their jobs at higher rates than do men. Because of this, the firm fills the position with the male candidate. What kind of discrimination is this? A. Employee discrimination. B. Consumer discrimination. C. Employer discrimination. D. Statistical discrimination. E. None of the above.

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

In the standard Becker model of discrimination, each firm is associated with a discrimination coefficient of d > 0 and acts as if the wage paid to blacks is wB(1+d) where wB is the actual hourly wage paid to blacks. In equilibrium, a threshold level of d, labeled d*, comes about that sorts firms based on hiring decisions. Which of the following is not an outcome of this model? A. All firms with d ≠ d* will employ all blacks or all whites. B. Profits fall as d increases as long as d < d*. C. In the long run, discrimination will be competed away in a competitive labor market. D. All discriminating firms hire only white workers. E. All firms with d > d* earn the same amount of profit.

If one looks at U.S. Census data and finds that the average male salary is $43,000 while the average female salary is $38,000, which of the following is not likely to be a significant cause of this difference given U.S. labor market demographics? A. Women are more inclined than men to work part-time. B. Women have less education than men. C. Women and men prefer different kinds of jobs. D. Labor market discrimination. E. On-the-job experience.

10. 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. 11. In a discrimination model, nepotism is best described as A. a desire to maximize profit regardless of who one hires. B. a preference to hire a certain type of worker, e.g., a worker of one's same race. C. a preference to hire an integrated workforce. D. a desire to advance social causes over maximizing profits. E. hiring minority workers but then firing them quickly.

12. What is the main theoretical implication regarding the standard employer-based discrimination model? A. Most firms are discriminatory. B. Workers don't care if firms are discriminatory. C. Discrimination is not profitable. D. Discrimination can only occur if there are exactly two types of labor (e.g., white and black). E. Discrimination can only occur in competitive labor markets. 13. 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 14. Consider the following data for men and women:

If a regression estimates the return to experience for men, βM, to be 0.25, how much of the average difference in wages can be attributed to differences in work experience and how much can be attributed to discrimination and/or unobservable characteristics? A. $0.00 to differences in work experience; $2.50 to discrimination/unobservable characteristics. B. $1.20 to differences in work experience; $1.30 to discrimination/unobservable characteristics. C. $1.30 to differences in work experience; $1.20 to discrimination/unobservable characteristics. D. $1.50 to differences in work experience; $1.00 to discrimination/unobservable characteristics. E. $2.50 to differences in work experience; $0.00 to discrimination/unobservable characteristics. 15. Which of the following is a problem with comparable worth programs? A. Women will be paid more than men when their job "scores" are the same. B. Workers will be less likely to train in occupations or move to those jobs where they have the largest value of marginal product. C. Jobs traditionally filled by women will find it difficult to fill vacancies. D. Men will replace women in traditional female occupations. E. Women will be unable to perform jobs traditionally held by men. 16. Occupational crowding refers to A. Employee-based discrimination. B. Licensure requirements to enter certain occupations. C. Women being intentionally segregated into particular occupations. D. Firms receiving more applications for high-wage job openings than for low-wage job openings. E. Low turnover associated with high-wage occupations. 17. From 1980 to 2009, the female-male wage ratio in the United States A. held constant at about 0.7. B. fell steadily from about 1.0 in 1980 to 0.5 in 2009. C. increased modestly from 0.5 in 1980 to almost 0.6 in 2009. D. increased substantially from 0.6 in 1980 to almost 0.8 in 2009. E. increased substantially from 0.4 in 1980 to over 0.7 in 2009.

18. Within a household, the allocation of labor to household production depends on: A. Relative marketplace wages. B. Individual preferences for household versus marketplace work. C. Relative ability at household production. D. The household utility function for marketplace versus household goods. E. All of the above. 19. From 1980 to 2009, the black-white wage ratio for males in the United States A. held constant at about 0.7. B. fell steadily from about 1.0 in 1980 to 0.5 in 2009. C. increased modestly from 0.7 in 1980 to about 0.8 in 2009. D. increased substantially from under 0.5 in 1980 to almost 1.0 in 2009. E. increased substantially from 0.4 in 1980 to over 0.8 in 2009. 20. When the labor force participation rate falls, the average wage in the economy is likely to increase. Why? A. Because workers who have the worst wage options are those most likely to leave the labor force. B. Because educated workers are those most likely to leave the labor force. C. Because the most experienced workers are those most likely to leave the labor force. D. Because wages don't take into account salaried workers. E. Because the U.S. has a negatively skewed wage distribution. 21. A firm that discriminates against black labor will certainly A. hire all white workers. B. hire all black workers. C. hire no workers. D. hire a mix of black and white workers. E. earn less profit than it could earn if it did not discriminate. 22. The female-male wage gap in the United States is associated with women earning between 25 and 30 percent less than men. By all accounts, most of this difference is attributable to differences in A. education levels. B. returns to skill. C. height. D. labor market experience. E. productivity. 23. Consider a color-blind firm that is currently maximizing profits. An affirmative action policy is put in place requiring that all firms in the industry abide by a certain quota. Which of the following will occur? A. There will be no effect because the firm is currently color-blind. B. If the quota is already met, the firm will make no changes in its hiring practices. C If the firm currently meets the required quota, it will cut costs by adjusting labor to exactly meet the . affirmative action requirements. D. If the firm currently meets the quota, it will begin to lose profits due to the affirmative action requirements. E. The firm will have to fire some workers. 24. 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.

25. 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. 26. Compared to hiring a white worker, an employer is $5 less happy when he hires a black worker and is $6 less happy when he hires a Hispanic worker. The firm faces hourly wage rates of $20 for whites, $16 for blacks, and $14 for Hispanics. Which of the following describes the firm's hiring decision? A. The firm hires all white workers. B. The firm hires all black workers. C. The firm hires all Hispanic workers. D. The firm hires a mixture of white and black workers. E. The firm hires a mixture of white and Hispanic workers. 27. There is a restaurant that employs only males to serve guests, only females to tend the bar, and a mix of male and female cooks and dishwashers. The dishwashers and cooks never come in contact with the customers. This hiring pattern is most indicative of A. employer discrimination. B. employee discrimination. C. consumer discrimination. D. statistical discrimination. E. racial discrimination. 28. Which of the following causes a difference in wages but does not necessarily qualify as discrimination? A. Differences in schooling. B. Differences in skills. C. Differences in experience. D. Differences in language. E. All of the above lead to differences in wages but none of them necessarily qualifies as discrimination. 29. 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. 30. The empirical and theoretical results on occupational crowding in the United States suggest that A. occupational crowding is substantial in the United States, but this should not be thought of as a source of discrimination. B. occupational crowding is substantial in the United States, and much of this should be thought of as a source of discrimination. C. occupational crowding is substantial in the United States, but occupational crowding is unrelated to discrimination. D. there is minimal occupational crowding in the United States, and therefore it cannot be a source of discrimination. E there is minimal occupational crowding in the United States, but this is still thought to be an important . cause of racial discrimination but not gender discrimination.

Chap 09_6e Key 1. C 2. E 3. D 4. A 5. C 6. D 7. A 8. D 9. B 10. A 11. B 12. C 13. D 14. B 15. B 16. C 17. D 18. E 19. C 20. A 21. E 22. D 23. B 24. B 25. A 26. E 27. C 28. E 29. B 30. B

Chap 09_6e Summary Category Borjas - Chapter 09

# of Question s 30

Chap 10_6e Student: ___________________________________________________________________________

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 the above.

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.

Union jobs are highly sought out: A. When economic conditions worsen. B. When workers face job insecurity during periods of high unemployment. C. When there is a decline in real wages. D. When working conditions are poor. E. All of the above are true.

The wage-employment outcomes described by the contract curve A fail to exhaust all bargaining opportunities between the employer and the union, except for the single . point on the contract curve that is associated with maximum wages. B. are associated with the firm hiring more workers at a higher wage than they would under a monopoly union outcome. C. are Pareto optimal and result in an efficient contract. D. must be located below and to the left of the outcome that would result in the absence of a union. E. must be located above and to the left of the outcome that results when there is a monopoly union.

Which of the following is not associated with strikes? A. Strikes are costly to the firm. B. Strikes are costly to the union. C. The probability of striking is generally pro-cyclical. D. Strike duration is generally pro-cyclical. E. If the union makes wage offers, it will likely do so according to a downward-sloping resistance curve.

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.

Union organizing drives will be more successful in firms that have relatively ___________ labor demand curves. A. inelastic B. elastic C. flat D. linear E. increasing

When the possibility for strongly efficient contracts occurs, what will happen? A. The union and firm negotiate over the employment level but not over the wage. B. The union and firm negotiate over the wage level but not over the employment level. C. The labor demand curve must be vertical. D. Isoprofit lines must be horizontal. E. Isoprofit lines are parabolas that open upward.

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.

10. The union wage gap for private sector unions in the United States is presently on the order of A. 2%. B. 8%. C. 15%. D. 28%. E. 39%. 11. Right- to-work laws A. give workers the right to be represented by a union. B. give workers the right to not join a union. C. give a non-union worker the right to enjoy union benefits without paying union dues. D. give firms the right to hire replacement labor when the union strikes. E. give the firm the right to permanently fire anyone who strikes. 12. Yellow-dog contracts A. give workers the right to be represented by a union. B. give a non-union worker the right to enjoy union benefits without paying union dues. C. give firms the right to hire replacement labor when the union strikes. D. give firms the right to require a worker to not join a union as a condition of employment. E. give the firm the right to permanently fire anyone who strikes. 13. Prior to the New Deal legislation of the 1930s that expanded the rights of unions, firms were successful in suppressing union pressures by arguing in court that unions would A. restrict interstate commerce, which was prohibited by the Sherman Act. B. use coercive tactics to force workers to join the union. C. illegally spend dues on political activities. D. reduce the United State's competitive advantage it had over Germany. E. fail to protect the rights of children who could not legally join a union. 14. Which statement best describes international comparisons of unionization rates? A. Private sector unionization is about the same (around 20%) in all developed countries. B. Private sector unionization is greater in less-developed countries than in developed countries. C. Private sector unionization rates have steadily fallen in all developed countries over the last 40 years. D. Private sector unionization rates vary greatly by country. E. Private sector unionization rates exceed public sector unionization rates in all developed countries.

15. Featherbedding refers to A. negotiating better fringe benefits than non-union workers. B. one union using a previously negotiated contract as a starting point for its own negotiations. C. firing high-wage workers when the union goes on strike. D. the union requiring the firm to hire more workers than are actually needed to perform a particular task. E. the union using its members' dues to fund political activities. 16. In the case of a vertical contract curve, union negotiations will result in the firm hiring A. more workers and at a higher wage than it would in the absence of the union. B. the same number of workers but at a higher wage than it would in the absence of the union. C. fewer workers but at a lower wage than it would in the absence of the union. D. fewer workers but at a higher wage than it would in the absence of the union. E. the same number of workers but at a lower wage than it would in the absence of the union. 17. The Hicks Paradox concerns A. the irrationality of unions. B. the irrationality of union dues. C. the irrationality of strikes. D. the irrationality of substituting low-skill labor for high-skill labor. E. the irrationality of negotiating additional fringe benefits for union workers at the cost of receiving lower wages. 18. Which of the following is the best theoretical explanation for why strikes occur? A. The firm has a downward sloped resistance curve. B. The union and firm know that it is impossible to eventually negotiate an outcome on the contract curve. C. The union's leadership wants to please management. D. The union doesn't know how valuable labor is to the firm. E. The firm wants to minimize labor costs. 19. What is the union wage gap if the average union salary is $50,000 while the average non-union salary is $40,000? A. 10% B. 20% C. 25% D. 40% E. 50% 20. 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. CNon-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. 21. The National Labor Relations Act of 1935 (also known as the Wagner Act) was significant because it A. curtailed union power by permitting states to pass right-to-work laws. B. granted firms the right to break unions. C. outlawed yellow-dog contracts. D. created the National Labor Relations Board. E. granted union rank and file the right to decertify its leadership via election.

22. Labor unions in the United States today A. are as influential as they were in the 1950s. B. cover the same percent of workers as they did in years past. C. are much more popular among immigrant workers than among native workers. D. look to protect the interests of the employers of labor. E. tend to be less influential compared to labor unions in other developed countries. 23. 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. 24. A strike A. can be a rational response during the union-firm negotiation process. B. is a Pareto optimal outcome. C. hurts the firm's management and share holders but not the union members. D. is never in the best interest of the rank and file. E. is always in the firm's best interest. 25. Which one of the following statements is true? A. Firms try to attract unions to their plants and factories. B. Unions are beneficial to all workers. C. Unions tend to negotiate better fringe benefits for their members than what non-union workers receive. D. Many workers are likely to lose their jobs when firms become unionized. E. A union is legally allowed to undertake any bargaining tactics that it wishes. 26. The labor demand curve is A. the same as the marginal cost curve. B. composed of the peaks of isoprofit curves. C. upward sloping. D. derived solely from the price of the firm's good. E. determined completely by the firm's technology. 27. Which of the following best defines final-offer arbitration? A. After a short strike, the union offers a final contract to the firm which the firm must accept. B. An arbitrator produces a contract that the union and firm are both encouraged to accept. C. Final-offer arbitration occurs when the firm threatens to shut-down unless the union accepts the firm's final offer. D. An arbitrator chooses the firm's last offer or the union's last offer, and both sides must abide by whichever contract is chosen. E. An arbitrator facilitates a discussion between the union and firm after the cool-down period has expired. 28. The Labor-Management Relations Act of 1947 (also known as the Taft-Hartley Act) was significant because it A. curtailed union power by permitting states to pass right-to-work laws. B. granted firms the right to break unions. C. outlawed yellow-dog contracts. D. created the National Labor Relations Board. E. granted union rank and file the right to decertify its leadership via election.

29. An implication of the exit-voice hypothesis is that A. union workers who earn lower wages will circumvent union leadership to ask management for pay raises. B labor turnover (voluntary quits) will be lower at union firms than at non-union firms as workers can . bring issues to management through their union leadership. C. the union wage gap will be higher for more experienced union members. D. dues paid by rank and file union members must increase prior to wage negotiations. E dues paid by rank and file union members should be saved during stretches of labor peace in order to . fund worker benefits during strikes. 30. There are three firms in an industry, all of which hire comparably skilled workers. One firm is unionized and pays its 80 workers $11 per hour. Of the two non-union firms, one pays its 40 workers $12 per hour while the other pays its 160 workers $9.50 per hour. What is the union wage gap? A. -8 percent B. 0 percent C. 10 percent D. 12.5 percent E. 27 percent

Chap 10_6e Key 1. E 2. C 3. E 4. C 5. D 6. B 7. A 8. B 9. A 10. C 11. B 12. D 13. A 14. D 15. D 16. B 17. C 18. D 19. C 20. B 21. D 22. E 23. D 24. A 25. C 26. B 27. D 28. A 29. B 30. C

Chap 10_6e Summary Category Borjas - Chapter 10

# of Question s 30

Chap 11_6e Student: ___________________________________________________________________________

A firm that finds it extremely expensive to monitor the output of each worker will likely pay its workers A. with piece rates. B. with time rates. C. with incentive pay. D. according to how much each worker produces. E. on commission.

Which of the following is not true regarding the incentives different pay structures impose on workers? A. Piece rates are an option when individual output is easily measured by firms. B. Tournaments can elicit more effort than a time rate. C. Worker effort can be a function of the pay structure. D. Worker productivity is unrelated to the pay structure. E. Profit sharing is a pay structure designed to elicit more effort from workers, but it can suffer from freeriding.

Which of the following is not likely to help a firm motivate its workers to put forth more effort? A. Providing a free or subsidized company gym and/or cafeteria. B. Installing monitoring equipment. C. Providing competitive year-end bonuses. D. Implementing a profit-sharing scheme. E. All of the above are likely to motivate workers to put forth more effort.

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.

_______ are most closely associated with creating a pool of workers who are involuntarily unemployed. A. Piece rates B. Incentive pay schemes C. Time rates D. Efficiency wages E. Profit sharing schemes

Under a piece rate pay scheme where all workers face different upward-sloped marginal cost curves for providing effort, A. all workers will provide the same amount of effort. B. all workers will produce the same amount of output. C. all workers will be paid the same amount. D workers with higher marginal cost curves for providing effort will produce more output than workers . with lower marginal cost curves. E.workers with higher marginal cost curves for providing effort will produce less output than workers with lower marginal cost curves.

Which of the following is typically not a possible disadvantage of a tournament? A. Competitors have little incentive to help one another (and they may even sabotage each other's work). B. Workers rarely understand all of the rules to a tournament. C A large prize can encourage workers to provide effort until the very end of the tournament, even if the . worker has a small chance of winning. D. Workers may collude to share the prize in order to provide lower levels of effort. E. The outcome of a tournament may appear to be random.

What happens to the piece rate if there is a ratchet effect? A. The piece rate decreases over time. B. The piece rate increases over time. C. The piece rate is replaced with a time rate. D. The piece rate is replaced with a salary contract. E. The piece rate is only paid to the least productive workers.

Which is not true regarding a delayed-compensation contract? A. A delayed-compensation contract discourages workers from shirking. B. A delayed-compensation contract decreases employee turnover within the firm. C. An effective delayed-compensation contract requires a mandatory retirement age. D. A delayed-compensation contract makes workers inherently more productive. E. A delayed-compensation contract is associated with an upward-sloping age-earnings profile.

10. 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. 11. 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. 12. Empirically, the relationship between CEO performance (measured in terms of share price) and CEO compensation is A. large and positive. B. small and positive. C. nonexistent. D. small and negative. E. large and negative. 13. A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. This equilibrium comes about in part because A. the firm pays workers according to a tournament. B. workers are less likely to shirk when there is a pool of unemployed workers who are willing to take their job. C. the firm agrees to not replace labor with capital. D. workers are unaware of the pool of unemployed workers as long as they keep their job. E. workers will do anything to be paid a higher wage.

14. A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. In this model, if the firm's cost of monitoring effort falls, A. the efficiency wage will fall. B. the number of shirking workers will fall. C. firm profits will fall. D. the firm will increase its number of factory managers. E. the pool of involuntarily unemployed workers will increase. 15. The optimal efficiency wage requires A. firms to pay the competitive wage. B. firms to pay any wage above the competitive wage. C. firms to pay the unique wage above the competitive wage such that the elasticity of output with respect to wages equals one. D. firms to pay fringe benefits. E. the total product curve to be downward sloping. 16. The bonding critique criticizes the model of efficiency wages because A. profit-maximizing firms should never be willing to pay more than the competitive wage. Bworkers should be willing to give the firm collateral that the firm would keep if the firm ever caught . the worker shirking, and in exchange the worker would be willing to work for a wage less than the efficiency wage. C. firms cannot issue bonds to pay for labor costs. D. workers do not know how well the firm can monitor worker effort. E. worker effort is unrelated to wages. 17. 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. 18. One argument against using a profit-sharing scheme is the potential for free-riding. In this situation, freeriding refers to A. one firm using the same contract specifications as another firm. B. a worker not providing effort because his contribution to profit is very small. C. a worker not providing effort because he doesn't want his co-workers' wages to increase. D. the firm not honestly reporting its profits. E.profits being insensitive to worker effort because all increases in profit are returned to the workers due to the profit-sharing scheme. 19. What prevents a firm from offering a delayed-compensation scheme to its employees and then firing each worker when the worker's value of marginal product equals his or her wage? A. Firms that offer delayed-compensation schemes are legally barred from firing workers. B. Profits would increase by allowing the worker to continue work at a lower wage. C. The worker will have already retired by the time the worker's value of marginal product equals his or her wage. D. The firm would lose the trust of the workers, and new workers would not accept the payment scheme. E. Profits are insensitive to when the worker quits his job.

20. Suppose a firm overpays its workers at the start of the job, and then the firm slowly lowers wages over time until eventually the firm pays the workers considerably less than the worker's marginal product of labor. What prevents this "reverse of a delayed-compensation scheme" from being implemented? A. Workers prefer wages to increase over time. B. The firm would fire the worker as soon as the worker's value of marginal product exceeded the worker's wage. C. Workers would leave the job as soon as the firm tries to pay the worker less than his or her value of marginal product. D. The firm would need to enforce a mandatory retirement age which is illegal in the United States. E. The workers would never have an incentive to invest in general training. 21. Spot labor markets are best described as A. firms post a wage and workers decide how many hours of work to sell at that wage. B. workers post a wage and firms sign long-term contracts specifying how many hours of work to purchase at that wage. C.a worker decides how many hours of work to supply in each time period given expectations concerning his or her age-wage profile. D. unions and firms negotiate wage contracts. E. workers retire when the value of their marginal product starts to fall. 22. 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. 23. A piece rate compensation system A. underemphasizes the quantity of output produced. B. attracts and benefits the most able workers. C. inherently hurts minorities. D. decreases a firm's productivity. E. has no disadvantages. 24. Which of the following statements is false? A. Profit sharing redistributes profits back to the workers. B. Bonuses are frequently linked to performance. C. Bonuses are paid in addition to base salary. D. Free-riding can result from a compensation scheme that gives competitive individual bonuses. E. Free-riding can result from profit sharing. 25. If designed correctly, tournaments A. discourage competition. B. reward players according to their ranked productivity. C. elicit equal effort from all workers. D. always reward a single winner. E. reduce the applicant pool to just those workers with the best degrees. 26. Piece rates typically A. encourage greater effort from workers. B. are more common than time rates. C. are associated with the worker incurring less risk concerning one's income. D. are more common among higher paying jobs. E. do not reward skill.

27. Which one of the following statements about piece rate compensation schemes is false? A. Piece rate systems attract more able workers. B. Piece rate systems elicit high levels of effort. C. Piece rate systems are preferred by discriminatory firms. D. Piece rate systems discourage nepotism. E. Piece rate systems tie pay to performance. 28. 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. 29. A firm owner wants a manager to make difficult personnel decisions when necessary (which requires firing a worker every now and then) in order to maximize the firm's profits. The manager, however, prefers to not fire anyone. The worker also prefers not to be fired. In this example, who is the principal and who is the agent? A. The firm owner is the principal. The manager is the agent. B. The firm owner is the principal. The should-be-fired worker is the agent. C. The manager is the principal. The firm owner is the agent. D. The should-be-fired worker is the principal. The manager is the agent. E. The should-not-be-fired worker is the principal. The firm owner is the agent. 30. 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.

Chap 11_6e Key 1. B 2. D 3. E 4. C 5. D 6. E 7. B 8. A 9. D 10. C 11. C 12. B 13. B 14. A 15. C 16. B 17. A 18. B 19. D 20. C 21. A 22. E 23. B 24. D 25. B 26. A 27. C 28. D 29. A 30. D

Chap 11_6e Summary Category Borjas - Chapter 11

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Chap 12_6e Student: ___________________________________________________________________________

Anna works on a farm every spring during planting season and every fall during the harvest season. The farm fails to employ Anna during the summer or the winter. What type of unemployment does Anna experience? A. Frictional unemployment B. Seasonal unemployment C. Cyclical unemployment D. Structural unemployment E. Natural unemployment

James is currently unemployed. He is disappointed every Sunday when none of the job advertisements in the newspaper are for workers with his particular skill set. What type of unemployment is James experiencing? A. Frictional unemployment B. Seasonal unemployment C. Cyclical unemployment D. Structural unemployment E. Natural unemployment

Centerville has 200 unemployed people. Of these 200 people, 35 are unemployed for two weeks before finding a new job, 55 are unemployed for four weeks before finding a new job, 30 are unemployed for six weeks before finding a new job, 15 are unemployed for ten weeks before finding a new job, and 65 are unemployed for fifteen weeks before finding a new job. Approximately what is the average spell of unemployment in Centerville? A. 2 weeks B. 5 weeks C. 8 weeks D. 11 weeks E. 14 weeks

What does it mean to conduct a sequential search? A. To search for jobs even when employed. B. To accept a job offer from an employer, but then to still search for a better job offer. C. To accept the first job that one is offered. D. To apply to all job openings. E. To determine an asking wage and then accept the first job offer that pays a wage equal to or greater than the asking wage.

What best describes unemployment spells in the United States? A.Most spells of unemployment are rather short, and therefore most weeks of unemployment can be attributed to these short spells. B. Most spells of unemployment are rather short, but most weeks of unemployment are attributed to very long spells. C. Most spells of unemployment are rather long, and therefore most weeks of unemployment can be attributed to these long spells. D. Most spells of unemployment are rather long, but most weeks of unemployment are attributed to short spells. EMost spells of structural unemployment are much shorter than most spells associated with frictional . unemployment, but how these two interact to determine the average length of an unemployment spell is unknown.

Why is frictional unemployment considered to be productive? A. Search activities of workers and firms resulting in frictional unemployment improve the allocation of resources. B. Firms do not hire a worker until they find the most educated worker. C. There are more potential workers seeking jobs than there are jobs for workers when there is frictional unemployment. D. The demand for highly-skilled workers exceeds the supply of highly-skilled workers when there is frictional unemployment. E. Frictional unemployment leads to a decrease in the unemployment rate.

Compared to offering no unemployment benefits, the unemployment insurance system of the United States probably A. leads to shorter spells of unemployment. B. increases the unemployment rate. C. leads to lower post-unemployment wages. D. provides for a lower standard of living while unemployed. E. is less costly for firms.

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.

Which one of the following statements regarding the intertemporal substitution hypothesis is false? A. Workers are willing to reduce labor supplied during a recession. B. Increases in unemployment may be voluntary as workers collect UI benefits. C. Increases in unemployment may be voluntary as workers trade income for leisure during low-wage periods. D. Wages and hours of leisure will tend to move together over the course of the life-cycle. E. Labor supply responds to changes in the real wage.

10. Consider an economy with a labor force of 200 million people-180 million are employed while 20 million are unemployed. Each period, 45% of the unemployed population finds a job. If the economy is in a steady-state of unemployment, what percent of the employed population lose their job each period? A. 5% B. 10% C. 15% D. 20% E. 25% 11. Consider an economy with a labor force of 100 million people. Each period, 60% of the unemployed population find a job while 15% of the employed population lose their job. What is the steady-state unemployment rate in the economy? A. 5% B. 10% C. 15% D. 20% E. 60% 12. If the steady-state unemployment rate for an economy is 5%, and each period 2% of employed workers lose their jobs, what percent of unemployed workers find employment each period? A. 8% B. 18% C. 28% D. 38% E. 48%

13. 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. 14. 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. 15. How are unemployment rates in the United States related to education? A. Unemployment rates are unrelated to education. B. Higher levels of education are associated with higher rates of unemployment. C. Higher levels of education are associated with lower rates of unemployment. D.Unemployment rates are highest for high school dropouts but are unrelated to education for anyone who has a high school degree. E Unemployment rates for high school dropouts and high school graduates are roughly equal and are less . than the overall unemployment rate of college graduates. 16. In the United States from 1950 to 2005, it is most likely that an unemployed person will A. be re-employed in less than 5 weeks. B. be re-employed in 5 to 14 weeks. C. be re-employed in 14 to 26 weeks. D. be re-employed in more than 26 weeks. E. exit the labor force. 17. 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. 18. In the United States, the average replacement ratio associated with unemployment insurance benefits is A. 10% B. 35% C. 50% D. 80% E. 100% 19. What is the best description of unemployment insurance benefits in the United States? A. All unemployed workers receive the same benefit regardless of what their previous job was. B. All unemployed workers receive the same wage-adjusted benefit regardless of what state they live in. C. Unemployment benefits are based on family size and age. D. Unemployment benefits are greater for low-wage workers than for high-wage workers. E. Unemployment benefits are a greater percentage of previous earnings for low-wage workers than for high-wage workers.

20. The sectoral shifts hypothesis claims that A. cyclical unemployment will always exceed frictional unemployment. B. frictional unemployment will cause workers to extend their temporary lay-offs. C. most unemployed workers will return to their previous job because the firm knows the skills of the worker. D. there will always be a pool of unemployed workers who find jobs quickly (i.e., the frictionally unemployed). Ethere will always be a pool of unemployed workers who experience long spells of unemployment . because their skills do not match those that employers are looking for (i.e., the structurally unemployed). 21. The Phillips Curve relates A. the unemployment rate to economic growth. B. the unemployment rate to inflation. C. the unemployment rate to the real wage. D. the real wage to total employment. E. the real wage to the natural rate of unemployment. 22. The short-run Phillips curve is __________, while the long-run Phillips curve is vertical at the __________. A. downward sloping; real wage B. downward sloping; natural rate of unemployment C. upward sloping; minimum wage D. upward sloping; average nominal wage rate E. horizontal; origin 23. Since 1980, unemployment rates have been _________ in Europe relative to in United States. A. higher B. lower C. about the same D. unpredictable E. adjusting 24. The likelihood of experiencing a spell of unemployment lasting at least 12 months A. is roughly the same in the United States as it is in Europe. B. is much lower in the United States than in Europe. Cis much higher in Europe than in the United States with all European countries having at least 30% of . their unemployed experiencing a spell of unemployment of at least 12 months. D varies substantially across European countries, with some rivaling the United States but many others . being much higher than the U.S. E.varies substantially across European countries, with some rivaling the United States but many others being much lower than the U.S. 25. 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 An informal agreement between a firm and its employees to have the firm fire its most expensive . workers first during an economic contraction. E A historical agreement between a firm and its employees that the firm pays workers based on a . combination of age, experience and education.

26. The natural rate of unemployment is higher in many European countries than in the United States largely because A. European countries tend to offer more generous unemployment benefits than in the United States. B European countries tend to place fewer conditions on employers regarding working conditions and . firing workers than in the United States. C. the labor force is smaller in European countries than in the United States. D. more European workers are paid an annual salary rather than an hourly wage compared to workers in the United States. E. many European countries have recently targeted policies to fight hyperinflation rather than worrying about unemployment. 27. According to the neo-classical model, what would not result from the government levying a tax on firms for each worker the firm lays off? A. Firms would be less likely to lay off workers. B. Firms would be less likely to hire workers. C. Moral hazard would encourage workers to not work as hard as before. D. The long-run employment rate would increase. E. Unemployed workers would remain unemployed for longer periods of time. 28. If the intertemporal substitution hypothesis is correct, then A. the unemployment rate is artificially high. B. the unemployment rate is artificially low. C. discouraged workers should be included in the unemployed population because they actually want a job at the going wage. D discouraged workers should not be included in the unemployed population because they are optimally . choosing more leisure during a time of low wages. E. discouraged workers won't exist. 29. 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. 30. If the seasonally unemployed no longer qualified for unemployment insurance benefits, then we would expect A. no seasonal unemployment. B. no seasonal workers. C. higher wages for seasonal workers. D. lower wages for seasonal workers. E. greater UI benefits paid to non-seasonal workers.

Chap 12_6e Key 1. B 2. D 3. C 4. E 5. B 6. A 7. B 8. B 9. D 10. A 11. D 12. D 13. A 14. B 15. C 16. A 17. C 18. B 19. E 20. E 21. B 22. B 23. A 24. D 25. C 26. A 27. D 28. D 29. D 30. C

Chap 12_6e Summary Category Borjas - Chapter 12

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