Labour Demand MCQ;s

Question 1

In a perfectly competitive market, what is the predicted impact of a binding minimum wage covering all workers?

Answer 1

A. Employment should decrease, and wages should increase.

Question 2

Which statement best describes a ‘corner solution’ for leisure and the consumption good?

Answer 2

C. An individual does not work.

Question 3

Suppose that when the wages for plumbers increase by 20%, the number of electricians employed increases by 30%. Which word best describes the demand elasticity?

Answer 3

A. Substitutes

Question 4

Which equation is true for a profit-maximizing firm? MP = marginal product; K = capital; L = labour; w = hourly wage; r = hourly rate for capital.

Answer 4

D. MPL / w= MPK / r

Question 5

According to the lecture notes for chapter 3 (elasticity), what is the best evidence on the effects of increasing the minimum wage for teenagers?

Answer 5

D. It slightly decreases their employment.

Question 6

Which attribute of own-wage elasticity of labour supply is best supported by the U.S. data in Elder, Haider, and Orr (2023)?

A. The elasticity is often positive but is sometimes negative.
B. The elasticity has increased over time.
C. Women have a higher elasticity than men.
D. Married women have a much higher elasticity than single women.

Answer 6

Women have a higher elasticity than men.

Question 7

Consider a benefits program with a work requirement. Which scenario is LEAST likely?
A. An individual will reduce their hours worked to work exactly the number of hours required.
B. A working individual will not change their hours worked in response to the work requirement.
C. A worker will leave the workforce in response to the work requirement.
D. An individual will choose to work less than the requirement and not receive benefits.

Answer 7

A worker will leave the workforce in response to the work requirement.

Question 8

What is the response to a lump-sum subsidy for childcare, available only for parents who work? Define ‘working parents’ as parents who worked before the subsidy and ‘non-working parents’ as those who did not work before the subsidy.
A. The subsidy increases the hours worked only for working parents.
B. The substitution effect of the subsidy is to decrease the amount of the consumption good.
C. The subsidy encourages non-working parents to start working.
D. The subsidy increases the hours worked for working and non-working parents.

Answer 8

The subsidy encourages non-working parents to start working.

Question 9

For a wage decrease, the income effect is to consume ________ leisure, and the substitution effect is to consume ________ leisure.

A. Less, less
B. More, less
C. Less, more
D. More, more

Answer 9

Less, more

Question 10

The Global Financial Crisis reduced the value of many individuals’ retirement savings. What is the impact on a worker’s optimal retirement age of a reduction in pension value, assuming everything else such as wages are unchanged?

A. The income effect is to retire later.
B. The substitution effect is to retire later.
C. The income effect is to retire sooner.
D. The substitution effect is to retire sooner.

Answer 10

The income effect is to retire later.

Question 11

Consider a labour market where, at the current wage, the quantity supplied of workers exceeds the quantity demanded. Which word best describes this market?
A. Equilibrium
B. Shortage
C. Surplus
D. Monopsony

Answer 11

Surplus

Question 12

Which of the following is LEAST likely to occur with a natural disaster (like the Black Death) that affects labour but not capital?

A. Labour supply decreases
B. Equilibrium wages increase
C. Equilibrium employment decreases
D. Labour demand increases

Answer 12

Labour demand increases

Question 13

What is the effect of an increase in the wage on a worker’s retirement decision?

A. The income effect is to retire sooner, but the substitution effect is to retire later.
B. The income and substitution effects are to retire sooner.
C. The income effect is to retire later, but the substitution effect is to retire sooner.
D. The income and substitution effects are to retire later.

Answer 13

The income effect is to retire sooner, but the substitution effect is to retire later.

Question 14

Which BEST describes a natural disaster like Hurricane Andrew that affects capital but not labour? Assume labour and capital are complements.

A. Equilibrium wages increase.
B. Labour demand increases.
C. Equilibrium employment falls.
D. Labour supply increases.

Answer 14

Equilibrium employment falls.

Question 15

Who ‘pays’ more of a payroll tax when the labour demand curve is flatter than the labour supply curve?

A. The worker and the firm pay the same share.
B. The firm pays more than the worker.
C. The worker pays more than the firm.

Answer 15

The worker pays more than the firm.

Question 16

As labour _____ becomes less elastic (and more inelastic), monopsony power _______.

A. Demand; increases
B. Demand; decreases
C. Supply; increases
D. Supply; decreases

Answer 16

Supply; increases

Question 17

Which of the following is NOT an assumption of our simple model of the risky job market?

A. Jobs differ in the their level of safety.
B. Workers prefer safe jobs.
C. Workers maximise income, not utility.
D. All workers are equally productive.

Answer 17

Workers maximise income, not utility.

Question 18

Which is NOT a determinant of monopsony power?

A. The number of buyers.
B. The elasticity of market supply.
C. The price of the output good.
D. The interaction among buyers.

Answer 18

The price of the output good.

Question 19

Which best describes the equilibrium depicted by the hedonic wage function?

A. The hedonic wage function must be linear.
B. The hedonic wage function is downward sloping due to diminishing marginal returns to safety.
C. It is not efficient due to the externality of risk.
D. Workers who dislike risk the most work for firms that have the lowest costs for providing safe jobs.

Answer 19

Workers who dislike risk the most work for firms that have the lowest costs for providing safe jobs

Question 20

When should the firm offer a safe job rather than a dangerous one?

A. When the costs of offering a dangerous job are higher than the costs of offering a safe job.
B. When the costs of offering a dangerous job are lower than the costs of offering a safe job.
C. When the compensating differential is negative.
D. When the costs of offering a dangerous job are the same as the costs of offering a safe job.

Answer 20

When the costs of offering a dangerous job are higher than the costs of offering a safe job.

Question 21

How does our model for compensating differentials differ from Chapter 2’s labour supply model?
A. We study risk rather than wages.
B. We assume that workers have substantial mobility costs.
C. We study risk rather than leisure.
D. We assume workers maximize safety rather than utility.

Answer 21

We study risk rather than leisure.

Question 22

Suppose a worker is willing to work at a job with a one-in-a-thousand (0.1%, or 0.001) change of death, in exchange for a compensating differential of €100,000. What is this worker’s value of a statistical life?

A. 10 million euro
B. 100 million euro
C. 100,000 euro
D. 1 million euro

Answer 22

100 million euro

Wage diff/risk

Question 23

Which statement best describes the wage-schooling locus?
A. The slope is the average rate of return to schooling.
B. The slope is the increase in earnings associated with an additional year of schooling.
C. The locus represents the utility associated with different levels of schooling.
D. The wage-schooling locus is convex.

Answer 23

The slope is the increase in earnings associated with an additional year of schooling.

Question 24

If the interest rate is 4%, what is the present value of 1000 euros invested two years from now?

A. 1000
B. 962
C. 925
D. 1040
E. 1082

Answer 24

925

FV/(1+r)^t

Question 25

3 of the 4 statements below describe ability bias. 1 does not. Which 1 statement DOES NOT describe ability bias? A. It is easier for some people to acquire additional schooling / training than others. B. People have different wage-schooling loci. C. Different people's wage-schooling loci cross. D. Some people are more talented at many things than others.

Answer 25

Different people's wage-schooling loci cross.

Question 26

In which scenario is Anna the most likely to attend further education? A. Anna went to an Irish-speaking secondary school. B. Anna has a partial scholarship. C. Anna is 35 D. Anna has a high discount rate.

Answer 26

Anna has a partial scholarship

Question 27

Which of the following is a benefit of attending university? A. Psychic costs B. Foregone earnings C. Out of pocket or direct expenses D. Increased enjoyment from learning

Answer 27

Increased enjoyment from learning

Question 28

When will a firm provide firm-specific training for its workers? A. When the firm pays for the training. B. When the worker pays for the training. C. When the firm and worker share the cost of the training. D. When the benefits of training equal the costs.

Answer 28

When the firm and worker share the cost of the training.

Question 29

Regarding post-schooling human capital investment: A. The worker should keep investing in this form of human capital until the marginal benefits equal the marginal costs. B. This model explains why workers have high earnings growth every year until retirement. C. The worker should not invest in post-schooling human capital because the costs occur sooner than the benefits. D. This model explains why most workers never invest in human capital once they finish university.

Answer 29

The worker should keep investing in this form of human capital until the marginal benefits equal the marginal costs.

Question 30

Suppose Kappa has higher earnings with a secondary school degree, but Beta has higher earnings with a university degree. A simple comparison of Kappa and Beta's earnings will __________ the returns to schooling for _______ A. Understate; both Beta and Kappa B. Understate; Kappa C. Understate; Beta D. Overstate; Beta

Answer 30

Understate; Beta

Question 31

Who should pay for general training? A. The firm should pay for general training. B. The worker should pay for general training. C. The worker and the firm should share the cost of general training. D. General training should not be offered at the firm.

Answer 31

The worker should pay for general training

Question 32

Which factor is most likely to REDUCE an individual's decision to migrate? A. Increased benefits from moving B. Higher age C. Lower moving costs D. Lower discount rate

Answer 32

Higher age

Question 33

Considering our model of the demand and supply of low-skilled labour, A. Without immigration, wages for domestic workers would be lower. B. We assume that immigrant labour supply is inelastic. C. Immigration increases total employment of low-skilled workers. D. Without immigration, the total employment of low-skilled workers would be unchanged.

Answer 33

Immigration increases total employment of low-skilled workers.

Question 34

Which statement best describes mobility? A. Older, established workers are more likely to move. B. Most moves are local, within-country moves. C. Most people ignore 'psychic' factors such as family ties. D. People focus less on the benefits of the new location and more on the costs of the current location.

Answer 34

Most moves are local, within-country moves.

Question 35

In the Roy (1951) model of immigration, A. Low-skilled workers will not move when income inequality is higher in the sending country. B. High-skilled workers will move when income inequality is lower in the receiving country. C. Low-skilled workers will move when income inequality is higher in the sending country. D. High-skilled workers will not move when income inequality is lower in the sending country.

Answer 35

Low-skilled workers will move when income inequality is higher in the sending country.

Question 36

Which of the following is a 'loser' with respect to immigration? A. Consumers of products supplied by immigrants B. Immigrants who migrated to the country 20 years ago C. Immigrants as consumers D. Industries where immigrants and natives are perfect complements

Answer 36

Immigrants who migrated to the country 20 years ago

Question 37

Which statement best describes a tied stayer? A. Someone who benefits from staying even though the couple's best decision is to move. B. A couple where only one person benefits from moving. C. A couple where only one person benefits from staying. D. Someone who benefits from moving even though the couple's best decision is to stay.

Answer 37

Someone who benefits from moving even though the couple's best decision is to stay.

Question 38

In the long run, which statement best describes employer discrimination when firms are not identical? A. There will be no difference in size or profitability between discriminating and non-discriminating firms. B. Only discriminating firms should survive. C. Discriminating firms will be smaller than non-discriminating firms, but both will exist. D. Only non-discriminating firms should survive.

Answer 38

Only non-discriminating firms should survive.

Question 39

Assume firms differ in how much they dislike American workers. Suppose a firm has no distaste for Americans. In fact, it only hires American workers. According to our theory of employer discrimination, A. The firm will be less profitable than other firms. B. The firm will have higher costs. C. The firm will have more employees. D. The firm will produce less output.

Answer 39

The firm will have more employees

Question 40

Suppose all employers have the same distaste for male workers (d). Then A. Women and men will be paid the same. B. Women are hurt by discrimination. C. An employer will hire both men and women, but men will be paid less. D. Discrimination will persist.

Answer 40

An employer will hire both men and women, but men will be paid less

Question 41

At the workplace, discrimination can come from A. Employees B. Customers C. Employers D. All three of these

Answer 41

All three of these

Question 42

When do employee quit rates tend to be LOWER? A. In smaller firms B. In firms with a higher percentage of women C. During an economic recession D. In firms in urban locations

Answer 42

During an economic recession

Question 43

Which statement best describes the determinants of the male-female wage gap? A. The wage gap between female and male Uber drivers can be explained by driver behaviour such as experience, driving speed, and location. B. Female wages increased more slowly than male wages in the 1980s C. The wage gap is largest in firms that have regular hours and more flexible hours. D. Women are less likely to major in STEM because they have worse mathematics test scores.

Answer 43

The wage gap between female and male Uber drivers can be explained by driver behaviour such as experience, driving speed, and location

Question 44

Considering employee discrimination against older workers, where older workers and younger workers are perfect substitutes in production, A. Younger workers will have higher employment than older workers. B. Older workers will make less than younger workers. C. Firms will be segregated, hiring only younger workers or older workers. D. Employers will not hire older workers because no one will work with them.

Answer 44

Firms will be segregated, hiring only younger workers or older workers.

Question 45

Suppose firms use group average test scores to determine wages. Average test scores for left-handers are lower than average test scores for right-handers, but test scores are equally informative for left-handers and right-handers. What would statistical discrimination predict for the wages of L (a left-hander) and R (a right-hander) who have the same test score? A. L will be paid less than R, regardless of whether L and R have low scores or high scores. B. If L and R have a really low test score, L will be paid more than R. C. If L and R have a really high test score, L will be paid more than R. D. L and R will be paid the same.

Answer 45

L will be paid less than R, regardless of whether L and R have low scores or high scores

Question 46

Which is NOT an important assumption of existing theories of discrimination? A. Workers know about extent of discrimination in a firm. B. Capital markets are far from perfect. C. Discrimination is modelled as dislike of interacting with one group. D. Costs of switching firms are low if not zero.

Answer 46

Capital markets are far from perfect.

Question 47

Which statement is most consistent with the idea of employee discrimination of male employees against female employees, when complementary factors exist? A. Female supervisors are paid less than male supervisors. B. The average wage for women is below the average wage for men because fewer women are supervisors. C. Firms with female supervisors are less profitable. D. Only men are employed as supervisors.

Answer 47

The average wage for women is below the average wage for men because fewer women are supervisors

Question 48

What is the most likely effect of an increase in the wage? A. The income effect is to consume more of the consumption good B. The income effect is to consume less leisure. C. The substitution effect is to consume less of the consumption good D. The substitution effect is to consume more leisure.

Answer 48

The income effect is to consume more of the consumption good