Chapter 28 Mankiw/Taylor, Economics

Name:

True/False
Indicate whether the sentence or statement is true or false.

The natural rate of unemployment is the amount of unemployment that won't go away on its own, even in the long run.

If the unemployment rate falls, we can be certain that more workers have jobs.

In the UK over the twenty years from mid-1980s, the labour-force participation rate has been rising for women and has been falling for men.

The unemployment rate is about the same for the various demographic groups: men, women, people from non-white ethnic backgrounds, people from white ethnic backgrounds, young people, old people.

A minimum wage is likely to have a greater impact on the market for skilled workers than on the market for unskilled workers.

The presence of a union tends to raise the wage for insiders and lower the wage for outsiders.

A union is a labour cartel.

Unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labour and management.

An efficiency wage is like a minimum wage in that firms are required by legislation to pay it.

10.

Paying efficiency wages tends to increase worker turnover because workers can get continually higher wages if they change employer often.

11.

Firms may voluntarily pay wages above the level that balances the supply and demand for workers because the higher wage improves the average quality of workers that apply for employment.

12.

If wages were always at the competitive equilibrium, there would be absolutely no unemployment.

13.

Due to the existence of discouraged workers, the official unemployment rate may overstate true unemployment.

14.

The presence of unemployment insurance tends to decrease the unemployment rate because recipients of unemployment benefits are not counted in the labour force.

15.

Whenever the wage rises above the competitive equilibrium, regardless of the source, the result is additional unemployment.

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

16.

The amount of unemployment that the economy normally experiences is known as

a.	the natural rate of unemployment.
b.	cyclical unemployment.
c.	efficiency wage unemployment.
d.	frictional unemployment.

17.

According to the Office of National Statistics, a husband who chooses to stay home and take care of the household is

a.	employed.
b.	not in the labour force.
c.	a discouraged worker.
d.	unemployed.

18.

Refer to Figure 28-1. The labour force is

a.	134.0 million.
b.	none of these answers.
c.	92.3 million.
d.	139.7 million.
e.	98.0 million.

19.

Refer to Figure 28-1. The unemployment rate is

a.	3.2 percent.
b.	5.7 percent.
c.	5.8 percent.
d.	Not enough information is available to answer.
e.	6.2 percent.

20.

Refer to Figure 28-1. The labour force participation rate is

a.	47.1 percent.
b.	65.9 percent.
c.	50.2 percent.
d.	none of these answers.
e.	70.2 percent.

21.

A miner who has been unable to find work for so long that he has stopped looking for work is considered to be

a.	not in the labour force.
b.	not in the adult population.
c.	unemployed.
d.	employed.

22.

Which of the following statements is true of the UK?

a.	Women tend to have broadly similar unemployment rates as men.
b.	All of these answers are true.
c.	The labour force participation rate of men is rising.
d.	People from non-white ethnic backgrounds have a lower unemployment rate than people from white ethnic backgrounds.
e.	Most spells of unemployment are long term but most unemployment observed at any given time is short term.

23.

A minimum wage law tends to

a.	help all teenagers because they receive a higher wage than they would otherwise.
b.	have no impact on unemployment as long as it is set above the competitive equilibrium wage.
c.	create more unemployment in high-skill job markets than in low-skill job markets.
d.	create more unemployment in low-skill job markets than in high-skill job markets.

24.

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?

a.	Structural unemployment
b.	Cyclical unemployment
c.	Frictional unemployment
d.	None of these answers
e.	Sectoral unemployment

25.

If, for any reason, the wage is held above the competitive equilibrium wage,

a.	the quantity of labour supplied will exceed the quantity of labour demanded and there will be unemployment.
b.	unions will likely strike and the wage will fall to equilibrium.
c.	the quantity of labour demanded will exceed the quantity of labour supplied and there will be a labour shortage.
d.	the quality of workers in the applicant pool will tend to fall.

26.

A reservation wage is the

a.	maximum wage the firm is willing to pay.
b.	tip necessary to get a waiter to reserve a table.
c.	minimum wage the worker is willing to accept.
d.	competitive equilibrium wage.

27.

Which of the following government policies would fail to lower the unemployment rate?

a.	Establishing worker training programs
b.	Establishing right-to-work laws
c.	Reducing unemployment benefits
d.	Establishing employment agencies
e.	Raising the minimum wage

28.

Sectoral shifts tend to raise which type of unemployment?

a.	Structural unemployment
b.	Unemployment due to efficiency wages
c.	Unemployment due to unions
d.	Frictional unemployment

29.

Which of the following is an example of a reason why firms might pay efficiency wages?

a.	At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired.
b.	At equilibrium wages, workers often quit to find better jobs.
c.	At equilibrium wages, only minimally qualified workers apply for the job.
d.	At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy.
e.	All of these answers

30.

Some frictional unemployment is inevitable because

a.	of minimum wage laws.
b.	there are changes in the demand for labour among different firms.
c.	of unions.
d.	all of these answers
e.	efficiency wages may hold the wage above the equilibrium wage.

31.

Unions might increase efficiency in the case where they

a.	raise the wage for insiders above the competitive equilibrium.
b.	lower the wage of local outsiders.
c.	offset the market power of a large firm that is the dominant employer in a region.
d.	threaten a strike but don't actually follow through so there are no lost hours of work.

32.

Which of the following statements about efficiency wage theory is true?

a.	Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities.
b.	Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law.
c.	Paying the lowest possible wage is always the most efficient (profitable).
d.	Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

33.

Unions tend to increase the disparity in pay between insiders and outsiders by

a.	increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the non-unionized sector.
b.	increasing the demand for workers in the unionized sector.
c.	decreasing the demand for workers in the unionized sector.
d.	increasing the wage in the unionized sector, which may create an increase in the supply of workers in the non-unionized sector.

34.

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?

a.	unemployment due to unions
b.	unemployment due to efficiency wages
c.	frictional unemployment
d.	unemployment due to minimum-wage laws

35.

If unemployment insurance were so generous that it paid laid off workers 95 per cent of their regular salary,

a.	frictional unemployment would fall.
b.	the official unemployment rate would probably understate true unemployment.
c.	the official unemployment rate would probably overstate true unemployment.
d.	there would be no impact on the official unemployment rate.
e.	none of these answers