Labor Economics Final Exam

Labor Economics Final Exam

Labor Economics Final Exam

Multiple Choice Question (3 points each). Please highlight O L! one correct ans"er. 1. Obtaining a Ph.#. is a more attracti$e in$estment %) the higher the mar&et rate o' interest. () the larger the earnings o' persons "ith a master)s *egree. C) the ol*er the person. D) the longer the person expects to work. +. ,n present $alue calculation- the *iscount rate is usuall. base* on the 'ollo"ing/ %) interest rate () in'lation rate C) both A and B are acceptable #) none o' abo$e 3. 0he total economic cost o' a college e*ucation inclu*es %) the 'orgone earnings that a high school gra*uate coul* earn. () tuition- boo&s- an* other 'ees. C) housing- 'oo*- an* clothing. D) both (A) and (B). 1. %ccor*ing to the schooling mo*el- one shoul* in$est in a college e*ucation i' %) the sum o' the earnings o' college gra*uates is greater than those o' a high school gra*uate. () the stream o' earnings o' college gra*uates is greater than those o' a high school gra*uate.
+

Labor Economics Final Exam

C) the net present val e o! the stream o! earnings o! (and costs associated with) college grad ates is greater than that o! high school grad ates. #) .ou 'ace a higher interest rate than those in*i$i*uals "ho t.picall. go to college. 2. 0he slope o' the "age3schooling locus in*icates A) the monetar" gains !rom each additional "ear o! schooling as more schooling is ac# ired. () the cost o' obtaining one more .ear o' school. C) both (%) an* ((). #) all o' the abo$e. 4. 0he schooling mo*el pre*icts that the le$el o' schooling *i''ers bet"een in*i$i*uals because o' *i''erences in %) abilit.. () the rate o' *iscount. C) pre'erences. D) all o! the above. 5. 6age ine7ualit. bet"een s&ille* an* uns&ille* "or&ers ma. ha$e increase* *uring the 189:)s because %) the tra*e *e'icit in manu'acture* goo*s- "hich are pro*uce* b. largel. uns&ille* "or&ersexpan*e* *uring the 189:;s. () unions lost some o' their bargaining po"er *uring the *eca*e as membership 'ell. C) immigration to the <.=. *uring the 189:;s "as comprise* largel. o' uns&ille* "or&ers.
3

Labor Economics Final Exam

#) o' s&ille*3biase* technical change. E) all o! the above. 9. 6hich o' the statement o' the >ini coe''icient is incorrect? %) measures the *egree o' ine7ualit. o' the income *istribution. () ranges 'rom : to 1. C) decreases as ine# alit" increases. 8. 6hich o' the 'ollo"ing is a pre*iction o' the migration mo*el? %) an impro$ement in the economic opportunities a$ailable in the *estination raises the li&elihoo* that the "or&er "ill mo$e. () an impro$ement in the emplo.ment opportunities at the current region o' resi*ence lo"ers the li&elihoo* that the "or&er "ill mo$e. C) an increase in migration costs re*uces the li&elihoo* o' a mo$e. D) all o! the above. 1:. 6hich o' the 'ollo"ing @obs are the most ris&. in term o' number o' *eaths per 1::-::: "or&ers in +::9? A) mining () leisure an* hospitalit. C) 'inancial acti$ities #) construction. 11. % "or&er is more li&el. to mo$e i' she is %) .oung. () e*ucate*. C) recei$ing go$ernment assistance.
1

Labor Economics Final Exam

D) both (A) and (B). 1+. 6hich statement about Ao. mo*el 'or international migration to the <nite* =tates is true? A) positive selection implies that highl" skilled workers will choose to migrate to $%. () negati$e selection implies that highl. s&ille* "or&ers "ill choose to migrate to <=. C) an increase in <= income can *ecrease number o' migrations regar*less o' positi$e or negati$e selection. #) both ( an* C 13. 0he labor mobilit. mo*el suggests that marrie*"or&ing couples A) !ace !amil" incentives that do not alwa"s coincide with personal incentives. () are al"a.s more li&el. to mo$e than i' the. "ere single. C) are al"a.s less li&el. to mo$e than i' the. "ere single. #) both (%) an* (C). E) none o' the abo$e. 11. % tie* sta.er is a spouse "ho %) mo$es to a *i''erent localit. "hen he or she "oul* sta. i' single. () sta"s at the c rrent localit" when he or she wo ld move i! single. C) sta.s at the current localit. regar*less o' "hat is best 'or the 'amil.. #) both (() an* (C). E) none o' the abo$e.
2

Labor Economics Final Exam

12. Compare* to o''ering no unemplo.ment bene'itsthe unemplo.ment insurance s.stem o' the <nite* =tates probabl. %) lea*s to longer spells o' unemplo.ment. () increases the unemplo.ment rate. C) lea*s to higher post3unemplo.ment "ages. #) pro$i*es 'or a higher stan*ar* o' li$ing "hile unemplo.e*. E) all o! the above. 14. 6hich o' the 'ollo"ing statement regar*ing +:11 cit. o' Aichmon*- B% e*ucation attainment is correct? %) comparing "ith national a$erage- the cit. o' Aichmon* has lo"er percentage o' a*ult population (+2 or ol*er) "ith bachelor)s *egree or higher () less than 5:C o' a*ult population (+2 or ol*er) are high school gra*uates or higher C) over &'( o! ad lt pop lation ()* or older) are bachelor+s degree or higher #) none o' the abo$e 15. From 182: to the late 189:s- the unemplo.ment rate A) was relativel" constant between & and ,' percent. () has been tren*ing up"ar*s 'rom + percent to +: percent. C) has been tren*ing *o"n"ar*s 'rom 1: percent to 1 percent. #) has $arie* ran*oml. bet"een 1 an* 14 percent.
4

Labor Economics Final Exam

19. E*ucation ten*s to lo"er the unemplo.ment rate because %) e*ucate* "or&ers in$est more in speci'ic training that marries 'irms an* "or&ers together an* ma&es them less li&el. to be lai* o'' in a*$erse economic con*itions. () e*ucate* "or&ers ha$e better net"or&s 'or learning about alternati$e @ob opportunities. C) both (A) and (B). #) neither (%) nor ((). 18. =tructural unemplo.ment occurs because %) non3"or&ers enter the labor 'orce at unpre*ictable times. () in'ormation about a$ailable @obs 'or "hich the "or&er is 7uali'ie* ta&es time to accumulate. C) skills that workers are s ppl"ing and the skills that the !irms are demanding do not alwa"s match. #) none o' the abo$e +:. One o' the lessons o' economics regar*ing unemplo.ment is that %) onl. ine''icient mar&ets ha$e unemplo.ment. B) even in a well-! nctioning competitive econom". where the n mber o! workers e# als the n mber o! /obs. some workers will be o t o! work while the" search !or /obs. C) "hile there appears to be a number o' *i''erent t.pes o' unemplo.ment- there is onl. reall. one t.pe o' unemplo.ment once economic 'actors ha$e been ta&en into account.
5

Labor Economics Final Exam

#) the e7uilibrium le$el o' unemplo.ment in a competiti$e labor mar&et is Dero. =hort Essa. Questions/ 1. 6hat is human capital? Eo" *o people usuall. measure Euman Capital? List at least t"o bene'its o' an in*i$i*ual "ith high e*ucation attainment. 0 man capital is the range o! ni# e skills and abilities. as well as social and personalit" attrib tes. which people possess. 1hese skills and attrib tes prod ce an economic val e. A !ew o! the bene!its associated with an individ al gaining a high level o! ed cational attainment is a higher labor !orce participation rate. lower nemplo"ment rate. and greater earnings. +. 6h. is the concept o' present $alue important in *ecision ma&ing? 6hat is the present $alue (in +:1+) o' F4:-::: salar. in +:14? %ssume the *iscount rate is 2C. 1he concept o! present val e is important in decision making beca se calc lating present val e allows !or the comparisons o! dollar amo nts spent and received in di!!erent time periods. A dollar next "ear won2t be worth what is toda". For example we can see that the present val e o! 34'.''' in )',). with a disco nt rate o! *(. wo ld decrease considerabl" b" )',4. 1he !orm la !or calc lating present val e is 5resent 6al e 7 F t re 6al e8 (, 9 :nterest ;ate) or 56 7 "8 (,9r). %o the calc lation wo ld be 34'.'''8 (, 9 *(). (<,8)',). 56734'.''')=
9

Labor Economics Final Exam

(<)8)',&. 5673*>.,?&)= (<&8)',?. 5673*?.?)))= (<?8)',*= 5673*,.@&') = ( <*8)',4= 5673?A.&4)). 3. List t"o @ob relate* characteristics that shoul* be compensate* "ith high "age rates- an* t"o @ob3 relate* amenities 'or "hich people are "illing to accept a lo"er "age rate. 1wo /ob related characteristics that sho ld be compensated with high wage rates are those /obs that expose a laborer to a high level o! risk. and those /obs that re# ire a high level o! ed cational attainment to per!orm. 1wo /obrelated amenities !or which people are willing to accept a lower wage are a good location and 1. <sing the migration mo*el "e ha$e learne*explain "h. .ounger "or&ers are more mobile than ol*er "or&ers- e$en though both ha$e the same @obs no"- an* are o''ere* the same @obs in another location. !ou are expecte* to list at least t"o reasons. According to the labor migration model. "o nger workers are more mobile than older workers beca se workers change /obs a lot in their )'2s. b t settle in more stable /obs a!ter their mid-&'2s. Also. older workers have a smaller pa"o!! period to reco p the costs associated with a /ob search. so the" are less likel" to leave. Finall". "o ng people who # it and move on to new /obs o!ten experience s bstantial increases in their wages. Finall". the migration cost !or older workers are higher.
8

Labor Economics Final Exam

2. #e'ine @ob turno$er. Eo" can @ob turno$er a''ect a business) bottom line? Bob t rnover is de!ined as # its and la"o!!s. or labor mobilit" within a labor market. Chenever a compan" has to replace an emplo"ee it creates cost. Among the costs associated labor t rnover are loss o! prod ctivit". and !or some companies a loss o! clients. Dther costs incl de. the time it takes to complete paperwork when an emplo"ee leaves an organiEation. advertising !or the open position. the se o! temporar" emplo"ment agencies. interviewing potential hires. and training new emplo"ees. All o! these costs can signi!icantl" a!!ect a b sinesses+ bottom line. 4. 0he *ata sho"s that the a$erage "omen)s "age is about 52C o' men)s "age. #oes this statistic impl. that there is *iscrimination against "omen? 6h. or "h. not? 1he di!!erence in the average women2s wage and men2s ma" not impl" that there is discrimination against women. 1here are several !actors that a!!ect male-!emale wage ratio. Dne o! them is that women ma" choose lower ed cation attainment. knowing the" will sta" home. Another reason is that even with the same level o! ed cation. women ma" have more !re# ent career disr ption. Finall". women2s wages are a!!ected b" occ pational crowding. D e to occ pational crowding. women have been segregated into occ pations where the ret rn to ed cation is lower. Comen wo ld be better o!! i! the" wo ld enter occ pations in which their skills do not
1:

Labor Economics Final Exam

deteriorate d ring the "ears the" spend in the ho sehold sector. 5. #e'ine- an* pro$i*e an example o' the 'ollo"ing unemplo.ment concept. Structural Unemployment3 arises i! the kinds o! persons looking !or work do not F!itG the /obs available. %kills might be speci!ic to the worker+s /ob or ind str". and laid-o!! workers lack the # ali!ications needed in the expanding sector. An example o! this wo ld be i! a lathe operator at an a tomobile plant wasn2t able to !ill a growing need !or teachers possessing bachelor+s degrees or above. Seasonal Unemployment-is like !rictional nemplo"ment it does not re!lect the ! ndamental imbalance o! s ppl"8demand. Host o! the nemplo"ed workers will ret rn to their !ormer emplo"er once the emplo"ment season starts. For example. workers in both the garment and a to ind stries are laid o!! reg larl" beca se new models are introd ced with clockwork reg larit". Cyclical Unemployment Iis like seasonal nemplo"ment. b t ebbs and !lows based on b siness c"cles. rather than nat ral seasons. 1his imbalance ma" arise beca se the econom" has moved into a recession. Firms wo ld re# ire a smaller work!orce to satis!" the shrinking cons mer demand and emplo"ers la" o!! man" workers. An example o! this wo ld be a home constr ction compan" la"ing o!! man" o! its workers d e to an economic downt rn. An economic recession wo ld signi!icantl"
11

Labor Economics Final Exam

red ce the demand !or the constr ction o! new homes. 9. =uppose the labor mar&et has "hite an* blac& "or&ers- "ith blac& "or&ers earning less than "hite "or&s. One 'irm is *iscriminator. to"ar* blac& "or&ers. 6hat t.pe o' "or&ers "ill this 'irm hire? 6hat "ill emplo.er *iscrimination result in terms o' the number o' people hire* an* business pro'its? :! a !irm is discriminator" toward black workers. it will most likel" hire white workers as it will most likel" blindl" perceive the costs o! hiring blacks as higher than their tr e costs. 1he larger the pre/ dice. the more likel" that !irms will hire white workers. :n this case. the !irm wo ld onl" hire white workers. A white !irm hires white workers p to the point where the white wage e# als the val e o! the marginal prod ct. %ince white wages are expensive. white !irms hire !ewer workers than it wo ld i! it hired black workers.

1+