Introduction to Economics
Mock Exam
Course Introduction
Introduction to Economics provides a foundational understanding of how societies allocate scarce resources to satisfy unlimited wants. This course explores the basic principles of microeconomics and macroeconomics, including supply and demand, market equilibrium, consumer behavior, production costs, market structures, and the role of government in the economy. Students will also examine key macroeconomic concepts such as GDP, inflation, unemployment, and fiscal and monetary policy. Through real-world examples, the course encourages critical thinking about how economic theories apply to everyday decisions and broader societal issues.
Recommended Textbook
Contemporary Labor Economics 10th Edition by Campbell McConnell
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18 Chapters
829 Verified Questions
829 Flashcards
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Page 2
Chapter 1: Labor Economics: Introduction and Overview
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13 Verified Questions
13 Flashcards
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Sample Questions
Q1) Because resources are scarce relative to human wants,economics is best described as:
A)the science of allocating productive resources fairly
B)a science of choice
C)the science of allocating goods and services fairly
D)the set of natural laws that govern human behavior in the face of adverse conditions
Answer: B
Q2) As distinct from product market transactions,labor market transactions are unique in that:
A)to the seller,the nonmonetary characteristics of the sale can be as important as the price
B)labor demand curves slope upward
C)the price of labor is not determined by supply and demand factors
D)they are less complex
Answer: A
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3
Chapter 2: The Theory of Individual Labor Supply
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) If a family has an earned income of $3000 per year,its subsidy payment will be:
A)$6000
B)$7500
C)$9000
D)$0
Answer: B
Q2) In the years following enactment of welfare reform in 1996,welfare case loads:
A)dropped slightly
B)increased slightly
C)dropped by more than 50%
D)increased by almost 50%
Answer: C
Q3) Consider the three combinations of leisure and income represented by points A,B,and C.Which of the following is a correct statement?
A)Larry prefers A to B
B)Larry prefers A to C
C)Larry prefers B to C
D)Larry prefers C to A
Answer: D
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Page 4
Chapter 3: Population, Participation Rates, and Hours of Work
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44 Flashcards
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Sample Questions
Q1) Which of the following best exemplifies the Becker substitution effect? An increase in the market wage leads a household to:
A)eat more fast-food meals
B)play more golf together
C)have more children
D)take fewer,but longer vacations
Answer: A
Q2) One of the primary reasons for the decline in the labor force participation rate of teens in the summer over the past 15 years is the:
A)below-average performance of the economy beginning in 1994
B)increased enrollment of teens in summer school programs
C)higher real wages available to teens since 1994
D)the slightly higher rate for whites and males coupled with a significantly lower rate for African-Americans and females
Answer: B
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Chapter 4: Labor Quality: Investing in Human Capital
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49 Flashcards
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Sample Questions
Q1) Other things equal,the lower the cost of a human capital investment:
A)the larger the net present value of the investment
B)the lower the rate of return on the investment
C)the fewer the number of people who will find the investment profitable
D)the lower the interest rate on funds borrowed to finance the investment
Q2) Empirical evidence suggests that:
A)Gender differences in earnings explain most of the gender wage gap
B)Most training is specific rather than general
C)Training appears to have little impact on wages
D)Training lengthens employment durations
Q3) If part of the typical college graduates additional earnings is attributable to ability and not to education:
A)the screening hypothesis must be false
B)estimated rates of return will overstate the actual rate of return
C)there will be less dispersion in the distribution of earnings than otherwise
D)the social rate of return will understate the private rate
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Chapter 5: The Demand for Labor
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64 Flashcards
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Sample Questions
Q1) (appendix)The slope of an isoquant at any point reflects the:
A)elasticity of demand for labor
B)isocost line
C)price of capital relative to labor
D)marginal rate of technical substitution
Q2) The marginal revenue product schedule:
A)measures the increase in total revenue that results from the production of one more unit
B)measures the decline in product price that a firm must accept in order to sell the extra output of one more worker
C)is the same whether the firm is selling in a purely competitive or imperfectly competitive market
D)is the firm's labor demand schedule,provided the firm is operating in the zone of production
Q3) The "zone of production" consists of labor inputs over the range of:
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Page 7
Chapter 6: Wage Determination and the Allocation of Labor
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Sample Questions
Q1) Which one of the following is generally considered a characteristic of a perfectly competitive labor market?
A)A few workers of varying skills and capabilities
B)Wage-setting behavior by firms
C)Numerous firms hiring labor from the same pool of qualified workers
D)Costly information
Q2) Since passage of NAFTA ,trade between the U.S.,Canada,and Mexico has:
A)increased,but the effects on employment have been modest
B)increased,causing substantial loss of U.S.manufacturing jobs
C)increased,causing substantial loss of U.S.service-sector jobs
D)not changed,but there has been a substantial loss in U.S.manufacturing jobs
Q3) At the profit maximizing level of employment,the wage rate is _____ and the level of employment is _____:
A)W<sub>1</sub>; Q<sub>1</sub>
B)W<sub>1</sub>; Q<sub>2</sub>
C)W<sub>2</sub>; Q<sub>1</sub>
D)W<sub>2</sub>; Q<sub>2</sub>
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Chapter 7: Alternative Pay Schemes and Labor Efficiency
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49 Flashcards
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Sample Questions
Q1) A simple income-leisure model might predict that salaried workers would work fewer hours than hourly workers.In fact the opposite seems to be true,in part because:
A)raises and promotions are "won" on the basis of productivity rankings
B)firms typically offer raises and promotions solely on the basis of seniority
C)of the principle-agent problem
D)salaried work is an example of a deferred compensation scheme
Q2) Which one of the following events could not have caused a shift from isoprofit line 1 to line 2?
A)The employer's share of the payroll tax rate has increased and the limits expanded
B)Firms structured fringe benefits so as to increase worker productivity
C)The government began to subject some fringe benefits to the personal income tax
D)Insurance companies offered group discounts for medical and disability coverage
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9
Chapter 8: The Wage Structure
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Sample Questions
Q1) Research by Krueger and Allen suggests that a substantial proportion of the increase in the college wage premium in the 1980s and 1990s can be explained by:
A)increased college enrollment by men
B)increased college enrollment by women
C)increased immigration rates
D)skill-biased technological change
Q2) The shape of the worker's indifference curves-I<sub>1</sub>,I<sub>2</sub>,and I<sub>3</sub>-indicates that:
A)the worker faces a constant trade-off between job safety and wages
B)for each successive reduction in job safety,greater increases in wages are required to maintain the same utility
C)for each successive reduction in job safety,smaller increases in wages are required to maintain the same level of utility
D)for each successive reduction in job safety,smaller reductions in wages are required to maintain the same utility
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Chapter 9: Mobility,Migration,and Efficiency
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Sample Questions
Q1) The average economic rate of return to migration is estimated to be:
A)negative
B)less than 5%
C)between 10% and 15%
D)greater than 20%
Q2) Suppose there is an increase in immigration rates of unskilled,illegal aliens.Which of the following is not likely to result?
A)Unskilled workers would lose if they are gross substitutes with illegal immigrants
B)Skilled workers would benefit if they are gross complements with unskilled workers
C)The wages of unskilled workers would fall in those markets not protected by minimum wages
D)For each immigrant who receives a job there would be one less job available for a native worker
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11
Chapter 10: Labor Unions and Collective Bargaining
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Sample Questions
Q1) Which one of the following is generally not associated with relatively high levels of unionization?
A)Services
B)Public administration
C)African Americans
D)Blue-collar workers
Q2) Of the countries listed in the text,union membership as a percent of the labor force in 2010 was greatest in:
A)the United States
B)Japan
C)Canada
D)Sweden
Q3) Negotiating a contract with a firm and using that contract as a basis for demands made of other employers is an example of:
A)pattern bargaining
B)collective bargaining
C)coercive bargaining
D)multiemployer bargaining
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Chapter 11: The Economic Impact of Unions
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50 Flashcards
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Sample Questions
Q1) The allocative efficiency loss associated with unions arises because:
A)job losers in the union sector take away jobs from more productive workers in the nonunion sector
B)the value of lost output in the union sector is greater than the value of any additional output in the nonunion sector
C)the union wage rises above the value of marginal product while the nonunion wage falls below it
D)job losers in the union sector are unqualified to work in the nonunion sector,so society loses their potential output
Q2) The measured union wage advantage in this market is:
A)20%
B)25%
C)$2
D)More information is needed
Q3) Unions may reduce economic efficiency by:
A)providing an "exit" mechanism
B)insisting promotions be based on ability rather than seniority
C)imposing restrictive work rules
D)reducing worker turnover
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Page 13
Chapter 12: Government and the Labor Market:
Employment, Expenditures, and Taxation
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Sample Questions
Q1) Which of the following best explains the growth of public-sector employment relative to the private sector since 1950?
A)Labor supply has increased at the same pace in both sectors,but labor demand has increased more rapidly in the public sector
B)Labor supply has increased at the same pace in both sectors,but labor demand has increased more rapidly in the private sector
C)Labor demand has increased at the same pace in both sectors,but labor supply has increased more rapidly in the public sector
D)Labor demand has increased at the same pace in both sectors,but labor supply has increased more rapidly in the private sector
Q2) Independent of taxes raised to finance it,the provision of a public good most likely:
A)reduces labor supply because of the income effect
B)reduces labor supply because of the substitution effect
C)increases labor supply if the public good is a close substitute for goods consumers otherwise would have bought
D)has no impact on labor supply decisions
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Chapter 13: Government and the Labor Market: Legislation and Regulation
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Sample Questions
Q1) "Living wage" laws:
A)apply minimum wage laws to workers who would not otherwise be covered by the federal minimum wage
B)generally apply to employers who are under contract or receiving financial assistance from local government
C)typically require covered employers to pay a wage more than three times the minimum wage
D)have had negligible effects on employment or poverty status of covered employees
Q2) Consider the diagram.Suppose the government establishes a minimum wage of $7.00 in this market.If all displaced workers subsequently contribute an amount equal to their next most productive employment,the net loss of domestic output is:
A)$17.50
B)$40
C)$50
D)$75
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Page 15
Chapter 14: Labor Market Discrimination
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Consider Becker's "taste-for-discrimination" model.All else equal,the increase in female labor supply over the past 40 years should have resulted in:
A)reduced employment opportunities for women
B)a lower relative wage for women
C)a higher relative wage for women
D)increased efficiency in the labor market
Q2) According to the theory of statistical discrimination:
A)the process of competition should put discriminating employers at a competitive disadvantage
B)the discrimination coefficient is a measure of prejudice in the labor market
C)there will be discriminatory wage differentials because a firm with market power distinguishes between different groups with different elasticities of labor supply
D)a person is judged on the basis of the average characteristics of her or his demographic group
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16
Chapter 15: Job Search: External and Internal
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34 Verified Questions
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Sample Questions
Q1) An increase in unemployment compensation is predicted to:
A)reduce unemployment by raising acceptance wage rates
B)reduce unemployment by reducing acceptance wage rates
C)increase unemployment by reducing acceptance wage rates
D)increase unemployment by raising acceptance wage rates
Q2) Internal labor markets are most likely to exist if:
A)workers do not require extensive amounts of firm-specific training
B)there are substantial costs to the employer associated with worker turnover
C)costs of screening and recruiting job applicants are relatively low
D)workers' productivity does not increase with experience
Q3) The job search model implies that:
A)the longer the expected job tenure,the lower the acceptance wage
B)the higher the acceptance wage,the shorter the expected search duration
C)expected search duration is longer during a recession
D)if job searchers perceive that a recession is temporary,they will reduce their acceptance wages
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Chapter 16: The Distribution of Personal Earnings
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Sample Questions
Q1) The distribution of earnings has become more unequal:
A)among women but not among men
B)in part due to the reduction in the college wage premium in the 1980s
C)in part due to greater import competition in the 1980s
D)in part due to a reduction in the number of young and inexperienced workers in the 1990s
Q2) If one were to draw a Lorenz curve from the data,what point would be plotted corresponding to "40%" on the horizontal axis?
A)11%
B)15%
C)40%
D)60%
Q3) The mode of this distribution is:
A)10,000 workers
B)between $20,000 and $30,000
C)between $30,000 and $40,000
D)between $40,000 and $50,000
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18
Chapter 17: Labor Productivity: Wages,Prices,and Employment
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Sample Questions
Q1) Which of the following is one of the reasons typically given for the relatively high secular growth rate of productivity for the period 1959 - 2006?
A)A three-fold increase in the capital stock
B)An increase in service sector output relative to the manufacturing sector
C)An increase in the average length of the workweek
D)An increase in the use of quotas and tariffs to protect domestic industries
Q2) Compared to the 1948 - 1973 period,the annual rate of productivity growth from 1974 - 1995 was approximately:
A)one fourth as much
B)one half as much
C)the same
D)twice as much
Q3) Labor productivity in the base year was 20.The following year,the productivity index stood at 105.Labor productivity in the second year was:
A)5
B)20
C)21
D)105
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Chapter 18: Employment and Unemployment
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Sample Questions
Q1) The number of officially employed persons in Littleville is:
A)450
B)525
C)600
D)675
Q2) Which of the following best describes the real balances effect? As the price level rises,the real value of dollar-denominated assets:
A)rises,which leads people to increase spending on normal goods and services
B)rises,which leads people to decrease spending on normal goods and services
C)falls,which leads people to increase spending on normal goods and services
D)falls,which leads people to decrease spending on normal goods and services
Q3) The official BLS unemployment rate may understate economic hardship because A)all part-time workers are considered fully employed
B)the unemployed include persons whose minimum acceptable wages are artificially high
C)some household members provide false information about search activity
D)the unemployed include semi-retired workers and teens who wish to work only part-time
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