Advanced Labor Economics Study Guide
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Course Introduction
Advanced Labor Economics delves into the theoretical and empirical foundations of labor markets, exploring topics such as wage determination, labor supply and demand, human capital investment, and the role of institutions like unions and minimum wage laws. The course examines advanced models of labor market behavior, including search and matching theory, discrimination, immigration, and the impact of technological change on labor outcomes. Students will also engage with econometric techniques for analyzing labor data and critically evaluate contemporary labor policy debates, with a focus on both developed and developing economies.
Recommended Textbook Labor Economics 6th Edition by George J. Borjas
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12 Chapters
360 Verified Questions
360 Flashcards
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Page 2
Chapter 1: Introduction to Labor Economics
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Sample Questions
Q1) The labor supply curve shows how many workers are willing to work
A)in a particular industry.
B)at any given time.
C)at the minimum wage.
D)at any given wage.
E)in order to maximize the firm's profit.
Answer: D
Q2) In part labor economics concerns:
A)How labor markets work.
B)The study of education decisions.
C)The study of how households decide where to live.
D)The study of income inequality.
E)All of the above.
Answer: E
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Chapter 2: Labor Supply
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Sample Questions
Q1) Of the 500,000 people (age 16+) in a particular country, 300,000 people are in the labor force.Of these, 240,000 are employed and 60,000 are unemployed.Of the 200,000 workers not in the labor force, 20,000 want jobs but have given up looking for one.What is the unemployment rate if discouraged workers are counted as being unemployed?
A)10%
B)20%
C)25%
D)48%
E)60%
Answer: C
Q2) All of the following represent an increase in non-labor income except for:
A)A decrease in the income tax rate.
B)Receiving higher dividends from a stock portfolio.
C)An increase in a spouse's wage.
D)Receiving an inheritance from a long-lost uncle who recently passed away.
E)Having one's property tax bill fall by $1,000.
Answer: A
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4
Chapter 3: Labor Demand
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Sample Questions
Q1) Adjustment costs are those costs
A)incurred by a firm as it transports its product from the factory to the marketplace.
B)incurred by a firm when it pays its workers overtime.
C)incurred by a firm as it changes the size of its workforce.
D)saved by a firm as it takes advantage of tax credits offered by the government.
E)saved by the firm when it fires a worker.
Answer: C
Q2) The slope of the production function while holding capital fixed is
A)the marginal product of labor.
B)the marginal product of capital.
C)the average product of labor.
D)the labor-capital ratio.
E)the capital-labor ratio.
Answer: A
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5
Chapter 4: Labor Market Equilibrium
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Sample Questions
Q1) If unskilled domestic labor and unskilled immigrant labor are substitutes in the production process, then a more open immigration policy will likely result in all but which of the following?
A)The total market supply of unskilled labor shifts out.
B)The market-clearing wage for unskilled labor decreases.
C)Total employment of unskilled labor increases.
D)The wage received by unskilled native workers decreases.
E)The demand curve for unskilled labor shifts up (out).
Q2) Which of the following does not characterize a perfectly discriminating monopsonist?
A)The firm's marginal cost of hiring curve is the labor supply curve.
B)The firm hires more workers than it would if it were a competitive firm.
C)The firm chooses employment and wage levels in order to maximize profit.
D)The firm pays each worker his or her reservation wage.
E)The labor supply curve can be upward sloping.
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Chapter 5: Compensating Wage Differentials
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Sample Questions
Q1) Risk-averse workers
A)have shallow wage-risk indifference curves when risk is graphed on the x-axis.
B)are willing to work in riskier environments for a relatively low increase in the wage.
C)are willing to accept large wage decreases in exchange for a safer work environment.
D)never work in risky environments.
E)are more productive than risk-loving workers.
Q2) If the U.S.system of unemployment insurance didn't exist, one would predict that A)workers would never become unemployed.
B)workers who became unemployed would remain unemployed for longer durations.
C)no worker would accept a job that is associated with seasonal unemployment.
D)seasonal unemployment would cease to exist.
E)workers in jobs that have high risks of unemployment or in jobs that face seasonal cycles of unemployment would be paid higher wages.
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Chapter 6: Human Capital
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Sample Questions
Q1) Suppose 40 percent of all potential workers are highly skilled and contribute $50,000 to the firm each year.The remaining 60 percent of potential workers are less skilled and contribute only $30,000 to the firm each year.When schooling is not used as a signaling device, how much is the firm willing to pay a worker chosen at random?
A)$30,000
B)$34,000
C)$38,000
D)$42,000
E)$50,000
Q2) People decide how much schooling to receive based on:
A)Their discount rate.
B)The marginal rate of return to schooling.
C)The present value of expected future earnings.
D)Their ability to succeed in education programs.
E)All of the above factors influence how much schooling one receives.
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8
Chapter 7: The Wage Structure
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Sample Questions
Q1) In the United States over the last 30 years, wage differentials have
A)narrowed for all groups of workers.
B)increased for all groups of workers.
C)increased for skilled workers but have narrowed for unskilled workers.
D)decreased for skilled workers but have increased for unskilled workers.
E)increased for women but have narrowed for men.
Q2) What does it mean for the U.S.economy to have a positively skewed wage distribution?
A)Most workers earn below the average wage.
B)A large proportion of workers earn very high wages.
C)The average wage equals the median wage.
D)The distribution of wages is symmetric around the mean.
E)The mean wage equals the median wage.
Q3) An approximate Lorenz curve shows
A)the maximum and minimum wage gaps.
B)the relationship between income and tax revenue.
C)the share of income received by age group.
D)the relationship between income and earnings potential.
E)the cumulative share of income earned by quintiles of households.
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Page 9
Chapter 8: Labor Mobility
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Sample Questions
Q1) Which of the following statements is associated with the standard migration model?
A)Return migration signals that the mover regrets having made the initial move.
B)Repeat migration signals that the mover regrets having made the initial move.
C)Repeat migration signals that the mover is moving for job-related reasons.
D)The decision to move is expected to increase the household's overall utility.
E)Moving for job reasons is done at the expense of family desires.
Q2) The Roy model concerns
A)the skill-selection associated with immigration flows.
B)specific on-the-job training.
C)general training.
D)the age-earnings profile.
E)the cost-benefit analysis of layoffs or quits.
Q3) Which of the following is least likely to affect the net gain to migration?
A)An improvement in economic opportunities in the destination state.
B)An improvement in economic opportunities in the source state.
C)An increase in migration costs.
D)Changing one's preferences for living in different places.
E)Government spending.
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10
Chapter 9: Labor Market Discrimination
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Sample Questions
Q1) If one looks at U.S.Census data and finds that the average white salary is $39,000 while the average black salary is $36,000, which of the following is not likely to be a significant cause of this difference given U.S.labor market demographics?
A)Whites are more inclined than blacks to work part-time.
B)Blacks have less education than whites.
C)Labor market discrimination.
D)Whites are more likely than blacks to hold positions in upper management.
E)Whites are more likely than blacks to own their own business.
Q2) The perceived cost of hiring a black worker for an employer who is prejudiced against blacks will exceed
A)the cost of hiring whites.
B)the wage of whites.
C)the wage of blacks.
D)the white-black wage gap.
E)total profit.
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11
Chapter 10: Labor Unions
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Sample Questions
Q1) Which of the following best defines final-offer arbitration?
A)After a short strike, the union offers a final contract to the firm which the firm must accept.
B)An arbitrator produces a contract that the union and firm are both encouraged to accept.
C)Final-offer arbitration occurs when the firm threatens to shut-down unless the union accepts the firm's final offer.
D)An arbitrator chooses the firm's last offer or the union's last offer, and both sides must abide by whichever contract is chosen.
E)An arbitrator facilitates a discussion between the union and firm after the cool-down period has expired.
Q2) The Hicks Paradox concerns
A)the irrationality of unions.
B)the irrationality of union dues.
C)the irrationality of strikes.
D)the irrationality of substituting low-skill labor for high-skill labor.
E)the irrationality of negotiating additional fringe benefits for union workers at the cost of receiving lower wages.
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Chapter 11: Incentive Pay
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Sample Questions
Q1) Which one of the following statements best describes profit sharing?
A)Profit sharing is an equal division of all revenues among workers.
B)Profit sharing ties pay to the performance of individuals.
C)Profit sharing is a program that donates profits to the poor.
D)Profit sharing provides a system by which workers receive a share of the firm's profits.
E)Profit sharing discourages free-riding among workers.
Q2) One piece of evidence in favor of the efficiency wage model is that some sectors of the economy pay relatively high wages, whereas other sectors pay lower wages.This supports the efficiency wage model as it seems to provide evidence of what?
A)The existence of dual labor markets.
B)There are compensating differentials being paid depending on the type of work being done.
C)Unemployment is constant across sectors.
D)High-wage firms take advantage of delayed-compensation contracts.
E)Workers voluntarily provide bonds in case they are caught shirking.
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Chapter 12: Unemployment
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Sample Questions
Q1) The Phillips Curve relates
A)the unemployment rate to economic growth.
B)the unemployment rate to inflation.
C)the unemployment rate to the real wage.
D)the real wage to total employment.
E)the real wage to the natural rate of unemployment.
Q2) In the United States, the average replacement ratio associated with unemployment insurance benefits is
A)10%
B)35%
C)50%
D)80%
E)100%
Q3) In the United States from 1950 to 2005, it is most likely that an unemployed person will
A)be re-employed in less than 5 weeks.
B)be re-employed in 5 to 14 weeks.
C)be re-employed in 14 to 26 weeks.
D)be re-employed in more than 26 weeks.
E)exit the labor force.
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