True/False
Indicate whether the
statement is true or false.
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1.
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The natural rate of unemployment is the amount of unemployment that won't
go away on its own, even in the long run.
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2.
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If the unemployment rate falls, we can be certain that more workers have
jobs.
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3.
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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.
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4.
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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.
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5.
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A minimum wage is likely to have a greater impact on the market for skilled
workers than on the market for unskilled workers.
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6.
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The presence of a union tends to raise the wage for insiders and lower the wage
for outsiders.
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7.
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A union is a labour cartel.
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8.
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Unions may increase efficiency in some circumstances because they decrease the
cost of bargaining between labour and management.
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9.
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An efficiency wage is like a minimum wage in that firms are required by
legislation to pay it.
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10.
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Paying efficiency wages tends to increase worker turnover because workers can
get continually higher wages if they change employer often.
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11.
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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.
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12.
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If wages were always at the competitive equilibrium, there would be absolutely
no unemployment.
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13.
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Due to the existence of discouraged workers, the official unemployment rate may
overstate true unemployment.
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14.
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The presence of unemployment insurance tends to decrease the unemployment rate
because recipients of unemployment benefits are not counted in the labour force.
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15.
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Whenever the wage rises above the competitive equilibrium, regardless of the
source, the result is additional unemployment.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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16.
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The amount of unemployment that the economy normally experiences is known
as
a. | the natural rate of unemployment. | c. | efficiency wage
unemployment. | b. | cyclical unemployment. | d. | frictional unemployment. |
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17.
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According to the Office for National Statistics, a husband who chooses to stay
home and take care of the household is
a. | employed. | c. | a discouraged worker. | b. | not in the labour
force. | d. | unemployed. |
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18.
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Refer to Figure 28-1. The labour force is  a. | 92.3 million. | b. | 98.0 million. | c. | 134.0
million. | d. | 139.7 million. | e. | none of these
answers. |
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19.
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Refer to Figure 28-1. The unemployment rate is  a. | 3.2 percent. | b. | 5.7 percent. | c. | 5.8
percent. | d. | 6.2 percent. | e. | Not enough information is available to
answer. |
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20.
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Refer to Figure 28-1. The labour force participation rate is  a. | 47.1 percent. | b. | 50.2 percent. | c. | 65.9
percent. | d. | 70.2 percent. | e. | none of these
answers. |
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21.
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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. | c. | unemployed. | b. | not in the adult
population. | d. | employed. |
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22.
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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. |
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23.
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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. |
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24.
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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 |
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25.
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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. |
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26.
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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. |
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27.
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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 |
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28.
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Sectoral shifts tend to raise which type of unemployment?
a. | Structural unemployment | c. | Unemployment due to
unions | b. | Unemployment due to efficiency wages | d. | Frictional
unemployment |
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29.
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Which of the following is an example of a reason why firms might pay efficiency
wages? At equilibrium wages:
a. | workers sleep when the boss is not looking because workers are not deeply concerned
about being fired. | b. | workers often quit to find better
jobs. | c. | only minimally qualified workers apply for the job. | d. | workers cannot
afford a healthy diet so they fall asleep at work due to a lack of energy. | e. | All of these
answers |
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30.
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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. |
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31.
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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. |
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32.
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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. |
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33.
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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. |
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34.
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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 |
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35.
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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 |
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