Unemployment and Efficiency Wages: Problem Set and Explanations, Assignments of Economics

Download Unemployment and Efficiency Wages: Problem Set and Explanations and more Assignments Economics in PDF only on Docsity! Econ 20B- Additional Problem Set 5 I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. 1. The sum of which of the following would necessarily be equal to the adult population in the US statistics on labor? a. employed, unemployed b. discouraged workers, employed, unemployed c. employed, unemployed, not in the labor force d. discouraged workers, employed, not in the labor force ANS: C PTS: 1 DIF: 1 REF: 28-1 2. The labor force equals the a. number of people who are employed. b. number of people who are unemployed. c. number of people employed plus the number of people unemployed. d. adult population. ANS: C PTS: 1 DIF: 1 REF: 28-1 3. Ted is working part time. Alice is on temporary layoff. Who is counted as employed by the BLS? a. only Ted b. only Alice c. both Ted and Alice d. neither Ted nor Alice ANS: A PTS: 1 DIF: 2 REF: 28-1 4. Assuming everyone in the question below is in the adult population, which of the following is not correct? a. Elmo works part time as a baby sitter. The BLS counts him as employed and in the labor force. b. Anna is a full-time student not looking for a job. The BLS counts her as unemployed and in the labor force. c. Jim is on temporary layoff. The BLS counts him as unemployed and part of the labor force. d. Liz is seeking work, but has not found it. The BLS counts her as unemployed and in the labor force. ANS: B PTS: 1 DIF: 2 REF: 28-1 5. Which of the following definitions is correct? a. Labor force = number of employed. b. Labor force = population - number of unemployed. c. Unemployment Rate = (number of unemployed ÷ [number of employed + number of unemployed]) × 100. d. Unemployment Rate = (number of unemployed ÷ adult population) × 100. ANS: C PTS: 1 DIF: 1 REF: 28-1 6. The labor-force participation rate is defined as a. (Employed ÷ Adult Population) × 100. b. (Employed ÷ Labor Force) × 100. c. (Labor Force ÷ Adult Population) × 100. d. (Adult Population ÷ Labor Force) × 100. ANS: C PTS: 1 DIF: 1 REF: 28-1 7. Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, a. both the unemployment rate and labor-force participation rate would be higher. b. both the unemployment rate and labor-force participation rate would be lower. c. the unemployment rate would be higher and the labor-force participation rate would be higher. d. the unemployment rate would be lower and the labor-force participation rate would be unaffected. ANS: D PTS: 1 DIF: 2 REF: 28-1 16. If the minimum wage were currently above the equilibrium wage, than a decrease in the minimum wage would a. increase both the quantity demanded and the quantity supplied of labor. b. decrease both the quantity demanded and the quantity supplied of labor. c. increase the quantity of labor demanded and decrease the quantity supplied. d. decrease the quantity of labor demanded and increase the quantity supplied. ANS: C PTS: 1 DIF: 3 REF: 28-3 TOP: Minimum wage MSC: Analytical 17. Which of the following is not correct? a. A union is a form of cartel. b. Union workers typically earn 25 to 33 percent more than similar nonunionized workers. c. The power of a union comes from its ability to strike if its demands are not met. d. Workers in unions reap the benefits of collective bargaining, while workers not in unions bear some of the cost. ANS: B PTS: 1 DIF: 2 REF: 28-4 18. Samantha, the CEO of a corporation operating in a comparatively poor country where wages are low, decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision a. might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive. b. will help eliminate the excess supply of labor if she raises it sufficiently. c. may cause her workers to increase shirking. d. All of the above are correct. ANS: A PTS: 1 DIF: 1 REF: 28-5 TOP: Efficiency-wage theories MSC: Applicative 19. Efficiency wages refer to wages set at a level a. that would make the natural rate of unemployment zero. b. to encourage greater worker productivity. c. to maximize union members' total earnings. d. that would result in equilibrium in the labor market of each industry. ANS: B PTS: 1 DIF: 1 REF: 28-5 TOP: Efficiency wages MSC: Definitional II. CALCULATIONS AND EXPLANATIONS. Compute the numbers and provide explanatio ns when necessary. 1.The table below uses data for the year 2003 provided by the BLS and adjusted to be comparable to U.S. data. All values are in thousands. Fill in the blank entries in the table. Show your work! Country Adult Populatio n Labor Force Employed Unemploye d Unemploym ent Rate Labor-Force Participation Rate Japan 109,474 62,510 3,500 France 26,870 2,577 57.41 Germany 70,159 39,591 9.69 ANS: Country Adult Populatio n Labor Force Employed Unemploye d Unemployme nt Rate Labor-Force Participation Rate Japan 109,474 66,010 62,510 3,500 5.30 60.30 France 46,804 26,870 24,293 2,577 9.59 57.41 Germany 70,159 39,591 35,755 3,836 9.69 56.43 PTS: 1 DIF: 3 REF: 28-1 TOP: Labor-force participation rate | Unemployment rate MSC: Analytical III. SHORT ESSAYS. Answer the following questions briefly but concisely. 1. Since unemployment rates are consistently higher in Canada and some Western European countries than in the United States, it appears that the natural rate of unemployment is lower in the United States. What might explain this difference? ANS: The text offers two explanations for the natural rate of unemployment. The first is frictional unemployment, which results from people and employers taking time to search for the best match. Frictional unemployment would be higher in countries that have frequent and large sectoral shifts and generous unemployment compensation. It seems unlikely that Canada and Western European countries would have greater sectoral shifts than the United States. So, some of the difference might be due to more generous unemployment compensation in Canada and Western Europe. The second explanation for the natural rate of unemployment is that wages in some labor markets are above equilibrium. One rationale for setting wages above equilibrium is to attract and retain productive workers. There is no obvious reason why these efficiency wages should contribute to unemployment more in Canada and Western Europe than in the United States. Wages can also be above equilibrium in some markets because of minimum-wage laws. So, some unemployment in Canada and Western Europe might result from higher minimum wages. Finally, unions may negotiate higher wages for their members causing a rise in unemployment. Possibly, Canada and Western Europe have greater union membership rates or more powerful unions. PTS: 1 DIF: 3 REF: 28-2 | 28-3 | 28-4 | 28-5 TOP: Unemployment rate differences across countries MSC: Analytical 2. Provide the definition of “Efficient Wages” and four reasons why firms might pay efficiency wages ANS: Firms voluntarily pay above-equilibrium wages to boost workers productivity. Four reasons why firms might pay efficiency wages: 1. Workers health 2. Workers turnover 3. Workers quality 4. Workers effort Lecture Slides in Ch. 28 (pp.11 – 12)