Employment Policy
Question Bank
Course Introduction
Employment Policy explores the theories, frameworks, and practical approaches that shape labor markets and workplace dynamics. This course examines government interventions, labor legislation, minimum wage standards, unemployment insurance, and active labor market programs aimed at improving employment outcomes. Students analyze the effects of policy decisions on job creation, wage levels, workforce equity, and economic growth, as well as the challenges posed by globalization, technological change, and demographic shifts. Through critical discussion and case studies, students develop the analytical tools necessary to evaluate and design effective employment policies in diverse economic and social contexts.
Recommended Textbook
Modern Labor Economics Theory and Public Policy 11th Edition by Ronald G. Ehrenberg
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594 Flashcards
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Page 2
Chapter 1: Introduction
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Sample Questions
Q1) Multiple regression analysis uses
A) several dependent variables.
B) several independent variables.
C) data from several time periods.
D) several error terms.
Answer: B
Q2) A buyer values a good at $60 while the good costs a seller $50 to make and sell. The good is sold for a price of $55. Making the good results in pollution that harms people not directly involved in the transaction. When will this transaction result in a market failure?
A) Only when the cost of the pollution exceeds $10.
B) When the pollution has any cost.
C) Only when the cost of pollution exceeds $5.
D) Only when the cost of pollution exceeds $60.
Answer: A
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Chapter 2: Overview of the Labor Market
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Sample Questions
Q1) Which of the following events will cause a surplus of workers?
A) a wage above the market-clearing wage
B) an increase in the supply of workers
C) a decrease in the demand for workers
D) more workers wanting to work at higher wages
Answer: A
Q2) If a single small firm's demand for secretaries increases, then
A) its wage rate will increase and its employment level will remain the same.
B) its wage rate will increase and its employment level will increase.
C) its wage rate will remain the same and its employment level will increase.
D) both its wage rate and its employment level will remain the same.
Answer: C
Q3) If more people enter the labor market for architects, then
A) both the wage rate and the employment level will increase.
B) both the wage rate and the employment level will decrease.
C) the wage rate will increase and the employment level will decrease.
D) the wage rate will decrease and the employment level will increase.
Answer: D
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Chapter 3: The Demand for Labor
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Sample Questions
Q1) For two substitutes in production, if the substitution effect dominates
A) then the inputs are gross complements.
B) then the inputs are gross substitutes.
C) then the inputs could be either gross complements or gross substitutes.
D) then the inputs can not be used at the same time.
Answer: B
Q2) If labor costs twice as much as capital (per unit), then, in the long run,
A) labor will be twice as productive on average as capital.
B) labor's marginal product will be twice that of capital's.
C) the firm will hire twice as much labor as capital.
D) the firm will hire less labor and more capital.
Answer: B
Q3) Referring to Table 3.1, diminishing marginal returns begins with the ________ employee.
A) first
B) second
C) third
D) sixth
Answer: C
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Page 5
Chapter 4: Labor Demand Elasticities
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Sample Questions
Q1) In most states, there is a mandatory maximum number of children allowed per day care worker. If this maximum number is binding, then if the wages of day care workers goes up, the main effect on day care employment will be through
A) the scale effect.
B) the substitution effect.
C) it will be equally shared between the substitution and scale effect.
D) neither the scale nor the substitution effect as labor demand will not change.
Q2) In an industry, when the price of electricity goes up, the company employs more low-skilled workers. This implies
A) The substitution effect dominated in scale effect
B) The scale effect dominated the substitution effect
C) The substitution effect worked in the same direction as the scale effect
D) The scale effect was positive
Q3) Along a straight-line demand curve for labor
A) the slope becomes more negative as the wage rises.
B) the elasticity of demand remains constant.
C) demand becomes more elastic as the wage rises.
D) demand becomes less elastic as the wage rises.
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Chapter 5: Frictions in the Labor Market
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Sample Questions
Q1) After general training, the employee's wage will be
A) equal to his or her marginal product of labor.
B) greater than his or her marginal product of labor, due to the training received.
C) less than his or her marginal product of labor, to pay for the cost of the training received.
D) either greater or less than his or her marginal product of labor.
Q2) An increase in quasi-fixed costs would probably lead to a(n) ________ in the number of employees hired and a(n) ________ in the number of overtime hours worked.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
Q3) A quasi-fixed cost of labor is a cost that A) is expected to change over time.
B) is proportional to the number of hours worked.
C) is proportional to the number of workers hired.
D) is proportional to the amount of capital used.
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Chapter 6: Supply of Labor to the Economy: the Decision to Work
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Sample Questions
Q1) If Alice's wage increases from $6.00 per hour to $6.50 per hour, then
A) she will want to work more hours than before her raise.
B) she will want to work fewer hours than before her raise.
C) she will want to work the same number of hours as before her raise.
D) she may want to work more, fewer, or the same number of hours as before her raise.
Q2) A subsidy to pay for a portion of child care costs will cause labor force participation rates to
A) remain unchanged.
B) change ambiguously.
C) increase.
D) decrease.
Q3) Fixed costs of working act like
A) a pure substitution effect.
B) a pure income effect.
C) a combination of both a substitution and an income effect.
D) neither a substitution nor an income effect.
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8
Chapter 7: Labor Supply: Household Production, the Family, and
the Life Cycle
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Sample Questions
Q1) If the slopes between income and leisure on all indifference curves varies only by the level of income but remains unchanged by the hours of leisure, then A) the substitution effect of a wage increase will be large.
B) the substitution effect of a wage increase will be small.
C) the income effect of a wage increase will be large.
D) the income effect of a wage increase will be small.
Q2) If someone enjoys household production (such as raising children) this A) would be shown by a shift in his budget constraint.
B) will make his household production isoquant curves flatter than otherwise.
C) is the same as being more productive in household production.
D) will make his household production isoquant curves steeper than otherwise.
Q3) The government raises taxes on wages by 20% and splits the money evenly across households as "free money" such that the average household gets back what it paid extra in taxes. In a household where the dollars collected by the 20% added tax initially equals the dollars received as free money, their work hours are likely to A) increase.
B) decrease.
C) increase if the income effect dominates the substation effect.
D) remain unchanged.
Page 9
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Chapter 8: Compensating Wage Differentials and Labor
Markets
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Sample Questions
Q1) When workers indifference curves are drawn for wage rates versus injury risk
A) the indifference curves slope downwards because a higher wage is required to accept a higher risk of injury.
B) the indifference curves slope upwards because a higher wage is required to accept a higher risk of injury.
C) utility increases as a worker moves to the right along an indifference curve.
D) utility decreases as a worker moves to the right along an indifference curve.
Q2) High-paying jobs are also associated with generous benefits because
A) benefits which cost $100 generally increase utility by more than $100 in cash.
B) high-paid workers can benefit from the tax advantages given to benefits.
C) employers know how to spend money better than their employees.
D) high-paid workers are risk neutral.
Q3) Workers' indifference curves for wage rates versus benefits will be
A) downward sloping.
B) upward sloping.
C) downward sloping and concave.
D) upward sloping and convex.
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Page 10
Chapter 9: Investments in Human Capital: Education and Training
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Sample Questions
Q1) Fewer women leaving the labor market to raise children has given women the incentive to acquire ________ on-the-job training early in their careers, yielding age-earnings profiles which are ________ than they were about twenty years ago.
A) more; steeper
B) more; flatter
C) less; steeper
D) less; flatter
Q2) A nation shifts from a very progressive tax system (with a higher tax rate on higher incomes) to a tax system that tax all wages at the same rate. Both systems collect about the same revenues. This shift is likely to
A) decrease the fraction of the population getting more education.
B) increase the fraction of the population getting more education.
C) have no effect on the fraction of the population getting more education.
D) increase the fraction of the population wanting to work long hours.
Q3) The psychic costs of college are usually lowest for A) students with relatively high ability.
B) students from poor backgrounds.
C) students with average or low ability.
D) students who are at the margin in terms of attending college or not.
Page 11
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Chapter 10: Worker Mobility: Migration, Immigration, and Turnover
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Sample Questions
Q1) When compared to the earnings of political migrants, the earnings of economic migrants
A) start out lower, and increase more slowly.
B) start out lower, but increase more quickly.
C) start out higher, but increase more slowly.
D) start out higher, and increase more quickly.
Q2) Within each age group, people with ________ are most likely to migrate.
A) a large amount of education
B) a large amount of experience
C) young children
D) no current employment
Q3) An increase in his or her expected career length will make a worker
A) more likely to change jobs.
B) less likely to change jobs.
C) exactly as likely to change jobs.
D) either more or less likely to change jobs.
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Chapter 11: Pay and Productivity: Wage Determination
Within the Firm
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Sample Questions
Q1) Assume the following is true: in the past, many firms promised their workers a certain type of pension plan in exchange for lower wages. Recently, these firms reneged on their promise by changing to another pension plan that was significantly less valuable to older workers (but was more valuable to younger workers). Assuming the original promised plan was expected to be profitable, why would firms change their plans?
A) Firms had to report the costs of these plans to stockholders.
B) Firms wanted to motivate older workers to work harder.
C) Due to technical change, the skills of older workers became less valuable.
D) Firms placed a higher value on having a good reputation.
Q2) An employment contract is most likely to be successful when it
A) provides the proper incentives so as to be self-enforcing.
B) can be legally defensible.
C) can be specific about all tasks required of the employee.
D) includes legal penalties if either party abrogates the contract.
Q3) The surplus due to specific training of employees is
A) received by the employees.
B) received by the employers.
C) used to increase employees' wages above their marginal product.
D) shared by the employees and the employers.
Page 13
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Chapter 12: Gender, Race, and Ethnicity in the Labor Market
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Sample Questions
Q1) In the model where employers discriminate against females, those employers that devalue the productivity of the females more than other employers will
A) pay a lower wage to females.
B) still hire females even when they earn the same wage as males.
C) earn a lower profit.
D) do all of the above.
Q2) In general, women in low-paying jobs tend to earn ________ of male earnings (for those males in low-paying jobs) than women in high-paying jobs.
A) a higher percentage
B) a lower percentage
C) about the same
D) about the same, but subject to many major exceptions
Q3) Comparable worth
A) sets salaries in the most efficient manner possible.
B) implies that all professions are underpaid.
C) ignores market conditions.
D) depends on supply and demand factors.
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Chapter 13: Unions and the Labor Market
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Sample Questions
Q1) Suppose all textile workers in the United States formed a union. Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs)?
A) Labor costs represent a large share of textile production costs.
B) Textile firms will not invest in capital substituting for labor in producing textiles because textiles is a declining industry.
C) Labor is a good substitute for capital.
D) Textile buyers consider U.S. textiles a good substitute for non-U.S. made textiles.
Q2) The ________ Act established the National Labor Relations Board and required employers to bargain with lie-union that represents the majority of their employees.
A) Norris-LaGuardia
B) Wagner
C) Taft-Hartley
D) Landrum-Griffin
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15
Chapter 14: Unemployment
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Sample Questions
Q1) A nation has full employment when A) wages and prices are stable.
B) unemployment is at its lowest level.
C) unemployment rates are the same across all demographic groups.
D) workers are earning a living wage.
Q2) Most workers who are laid off
A) return to work with the same employer.
B) find work with another employer.
C) stay unemployed for a relatively long duration.
D) drop out of the labor force.
Q3) Advance notice of lay-offs should help to reduce
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment and frictional unemployment.
D) frictional unemployment and structural unemployment.
Q4) Unemployment insurance in the United States is structured so that A) replacement rates are constant.
B) almost all unemployed workers can collect UI benefits.
C) UI benefits are partially linked to previous pay.
D) UI benefits may be collected for one year after the job loss.
Page 16
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Chapter 15: Inequality in Earnings
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Sample Questions
Q1) Assume the demand for high tech good is perfectly inelastic. If workers producing high tech goods become more productive, then these workers employment will ________ and their wages will ________.
A) fall, rise
B) fall, fall
C) rise, rise
D) rise, fall
Q2) Which of the following will reduce inequality?
A) The rich and poor earn more, but the rich earn proportionately more.
B) The poor and rich earn less, but the earnings of the rich go down proportionately more.
C) The poor and the rich earn proportionately more.
D) The poor and rich earn less, but the earnings of the poor go down proportionately more.
Q3) Which of the following best describes the statement "Earnings at the 80th percentile were $20,000"?
A) 80% were earning $20,000 or less
B) 80% were earning $20,000 or more
C) The average earnings of those in the top 80% was $20,000
D) The average earnings of those in the bottom 80% was $20,000
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Chapter 16: The Labor Market Effects of International Trade and
Production Sharing
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Sample Questions
Q1) Studies have shown that government retraining programs
A) usually cost more than the benefit they create, or at best have benefits modestly above costs.
B) have been cost effective methods of retraining workers.
C) are cost effective methods of retraining younger workers, but not workers over age 45.
D) work best when training workers in firm-specific skills .
Q2) Meta-analysis of Active Labor Market Policies found that the most effective method of helping displaced workers was
A) reducing unemployment benefits when displaced workers do not put sufficient effort into searching for a new job.
B) retraining programs to help workers to find new jobs.
C) laws that make it more costly for employers to fire workers.
D) employment subsidies to employers (and not to displaced workers) to hire displaced workers.
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