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Question 1

The collective labour supply curve is less steep if there is an outward shift in the demand for labour and…

a) …unions demand improved working conditions.

b) …unions have a stronger preference for high wages than low unemployment.

c) …unions have a stronger preference for reducing unemployment than increasing wages.

d) …employers offer to pay higher wages for longer hours of work.

Question 2

Compared to the individual labour supply curve, the aggregate labour supply curve is:

a) …more elastic because demand is heterogeneous.

b) …less elastic because demand is heterogeneous.

c) …more elastic because of the possibility of moving between being out of the labour force and being in the labour force.

d) …less elastic because of transitions between being out of the labour force and being in the labour force

Question 3

The individual labour supply curve...

a) ...shifts downwards if workers' preference for leisure increases.

b) ...shifts to the left if there is technological progress in production.

c) ...shifts to the right if there is technological progress in production.

d) ...is not affected by technological progress in production.

Question 4

Suppose that a new union leadership is able to force an increase in the real wage during collective bargaining. As a consequence,

a) ...employment will increase and involuntary unemployment will decrease.

b) ...both employment and involuntary unemployment will decrease.

c) ...employment will decrease with no change in involuntary unemployment.

d) …employment will decrease and involuntary unemployment will increase.

Question 5

Assume there are only two possible states for an individual: either one is employed or one is unemployed (i.e. there is no "out of the labour force" state). Further assume that in an economy the separation rate for employed persons is 1% per month and the finding rate for unemployed persons is 10% per month. The frictional unemployment rate in such an economy would be

a) Exactly 1%

b) Approximately 5%

c) Approximately 9%

d) Exactly 10%

Question 6

In the simple model of labour supply represented in the figure above, the real wage is equal to (A)_________ and the quantity of labour supplied would be equal to (B)_______.

a) A: BC/OC
B: OT

b) A: OB/OT
B: DT

c) A: XD
B: DT

d) A: OB/OT
B: OT

Question 7

The figure above shows a labour market in which a union negotiates the real wage rate with employers. Union-voluntary unemployment is equal to (A)___; Individual-involuntary unemployment is equal to (B)___.

a) A: DF
B: DF

b) A: DE
B: EF

c) A: EF
B: DE

d) A: DF
B: zero

Question 8

Which of the following policies would NOT be expected to reduce the frictional unemployment rate?

a) Reducing the duration of full employment insurance benefits.

b) Increasing statutory minimum wages.

c) Providing relocation subsidies to unemployed workers.

d) None of the above policies would work to reduce frictional unemployment.

Oxford University Press, Online Resource Centre, Chapter 05.

Chapter 05

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