University of North Carolina, Economics 190, Oertel, Fall, Final Exam
December 11, 2002
Each
of these questions has only one right answer.
Please circle the letter for the appropriate answer, or otherwise clearly
indicate your choice.
With
some questions it may help to draw a diagram for yourself.
1.
The term “hidden unemployment” indicates that many
a)
unemployed
people are unwilling to apply for government assistance
b)
working
people are employed fewer hours than they desire and thus have unemployed
hours.
c)
unemployed
people become discouraged and leave the labor force
d)
working
people would like better jobs.
2.
The labor supply of men
a)
is
quite elastic, with a labor supply elasticity exceeding 2.
b)
is
fairly inelastic, with a labor supply elasticity close to 0.
c)
is
always the opposite of women’s labor supply.
d)
is
determined by profit-maximizing firms alone.
3.
Women’s labor supply responds more positively to wage changes because
a)
working
men behave fundamentally differently from working women.
b)
women’s
participation rates respond more strongly to wage changes.
c)
men
and women work in different jobs.
d)
women
have lower reservation wages.
4.
A firm hires labor and capital on competitive markets. The input prices are initially w=3 and
r=1. They increase to w=4 and r=2. Which of the following statements is
correct.
a)
The
scale effect, by itself, will induce the firm to hire more of both inputs.
b)
The
scale effect, by itself, will induce the firm to hire less labor and more
capital.
c)
The
substitution effect, by itself, leads to less labor and more capital being
hired.
d)
The
substitution effect, by itself, leads to more labor and less capital being
hired.
5.
In a competitive labor market a binding minimum wage leads to
a)
fewer
people looking for work.
b)
a
decrease in the quantity of labor demanded.
c)
people
leaving the labor force.
d)
an
increase in employment.
6.
A non-discriminating monopsony will
a)
employ
more workers and pay a higher wage than a competitive industry would.
b)
employ
more workers and pay a lower wage than a competitive industry would.
c)
employ
fewer workers and pay a lower wage than a competitive industry would.
d)
employ
fewer workers and pay a higher wage than a competitive industry would.
7.
All else equal, a person with a low discount rate will
a)
get
just as much education as a person with a high discount rate.
b)
get
more education than a person with a high discount rate.
c)
get
less education than a person with a high discount rate.
d)
get
no education at all.
8.
According to the ‘signaling’ view,
a)
education
will not be positively correlated with earnings.
b)
education
will not be positively correlated with ability.
c)
education
will not change a person’s productivity.
d)
education
will change your ability.
9.
One reason for mandatory retirement is that
a)
piece
rates are low for old workers.
b)
firms
need to pay efficiency wages.
c)
old
workers engage in sabotage or collusion.
d)
firms
need a way of ending a delayed compensation contract.
10.
The availability of unemployment insurance benefits
a)
does
not affect the ‘asking wage’.
b)
raises
the ‘asking wage’.
c)
lowers
the ‘asking wage’.
d)
only
affects firms.
11.
Assume, for simplicity, that the labor force never grows or shrinks.
Suppose
that each month 21% of unemployed workers find a job. Also, each month 2% of the employed lose their job. What is the steady-state unemployment
rate in this economy?
a)
8.7%
b)
9.5%
c)
10.5%
d)
91.3%
12.
The graph showing the relationship between inflation and unemployment is called
the
a)
Beveridge
curve
b)
Contract
curve
c)
Phillips
curve
d)
Iso-profit
curve
13.
For a country where all have the same earnings, the Gini coefficient would be
a)
0
b)
0.5
c)
1
d)
infinity
14.
In the U.S. and elsewhere, mean earnings are
a)
equal
to median earnings.
b)
less
than median earnings.
c)
equal
to the mode in the earnings distribution.
d)
greater
than median earnings.
15.
If welfare benefits are increased, the most likely outcome is:
a)
wage
inequality will rise.
b)
wage
inequality will fall.
c)
wage
inequality will not change.
d)
taxes
will fall.
16.
If immigrants from Norway to the US are “positively selected”, this means
a)
they
are automatically granted green cards.
b)
they
face discrimination.
c)
they
have more skills than the Norwegians who do not immigrate.
d)
they
have fewer skills than the Norwegians who do not immigrate.
17.
Commonly, a simple Oaxaca decomposition for the male-female wage gap finds that
a)
skill
differences and discrimination play roughly equal roles.
b)
skill
differences explain very little of the earnings difference.
c)
skill
differences explain most of the earnings difference.
d)
skill
differences counteract the effect of discrimination.
18.
If the “threat effect” is important and the “spill-over effect” is not, then
a)
the
union wage gap understates the union wage gain.
b)
the
union wage gap overstates the union wage gain.
c)
workers
are afraid to join a union.
d)
workers
are more productive than otherwise.
Part B: “Problems” (55 points= 55% of exam grade)
Please
answer all five questions.
1. [10 pts] Suppose a worker
currently resides in Georgia and is deciding whether to remain there or move to
California. There are three periods
left in the life cycle. If the worker
remains in Georgia, she will earn $30,000 per year in each of the three
periods. If the worker moves to
California she will earn $35,000 in each of the three periods. The worker’s rate of discount is 8 percent. What is the highest level of migration costs
that this worker is willing to incur and still make the move?
2. Recent (1990s) research has
found surprising evidence regarding the minimum wage.
a)
[4 pts] What is this evidence?
b)
[7 pts] How can we explain this? That
is, what kind of model can “explain” the recent evidence? What type of employer does this require?
3. People differ in abilities,
and this ability is usually not observed.
This creates a problem for researchers who want to investigate the return
to education.
a) [5pts] Why is there a problem? What is the problem?
b)
[6pts] How have researchers tried to overcome this problem?
4. a) [5 pts] How has the U.S.
wage distribution changed in the last 20 years?
b)
[6 pts] What are the most common (economic) explanations for these changes?
5. [6pts] “When unions enter
the picture, some people always lose their job.”
a)
If there is a model of employment determination behind this statement, what is
this model? Please explain and illustrate.
b)
[6 pts] The model you described in (a) has been found inadequate by some. Explain why and illustrate.