First midterm examination Essay

In such situations, select the best answer. Respond to the multiple choice questions on the cantors sheet. Please grid in your name and your student number by filling in the appropriate ovals in each column. You must grid in the ovals below each digit of your student number, and below each letter of your name. Respond to the written questions in the examination booklet. Hand in both the scan-trot sheet and your examination booklet, but you may retain the questionnaire. Part A: Multiple choice questions 1 . What trait do the alternative perspectives (other than the neo-classical radium) of the labor market have in common? ) They reject the neo-classical tenet that economic agents make rational choices based on their own free will. B) It is believed that market forces are the primary determinants of labor market outcomes, but these outcomes are often unjust c) They all hold that the conventional, neo-classical labor market model should take account of imperfect information, political constraints, and uncertainty d) They all hold that analysis should be based on descriptive realism rather than mathematical tools and graphical analysis e) None of the above 2.

Which of the following statements regarding the neo-classical approach to labor economics is false? A) All actors, whether they are firms or workers, make their choices free from coercion. B) The equilibrium outcome represents an equitable allocation of labor. C) The equilibrium outcome represents an efficient allocation of labor. D) All actors, whether they are firms or workers, are motivated by selfishness. E) That no one entity, whether among the firms or the workers, has too much power to determine the equilibrium outcome. 3.

The empirical literature on labor supply patterns for married women has ended to find all of the following except: (find the falsehood) a) b) c) d) e) Participation for married women peaks in the 35-44 age group Women with children have lower rates of labor force participation The higher the education level, the higher the labor force participation rate The higher the husband’s income, the lower the labor force participation rate All of the above are true, so none of the above. D 4. Which of the following statements concerning the elasticity of labor supply is true? ) Empirical estimates tend to point to an inelastic value for the wage elasticity of supply. It is generally higher for men than for women. The compensated elasticity (reflecting the substitution effect) tends to be lower in magnitude (I. E. Absolute value) than the uncompensated, gross elasticity. It can never have a negative value in any certain circumstances. The elasticity of labor supply with respect to income is positive. 5. Which of the following statements regarding the phenomena of discouraged workers and added workers is false? In periods of high unemployment, discouraged workers tend withdraw from the labor force.

In periods of low unemployment, discouraged workers tend to re-enter the Barbour force In periods of high unemployment, added workers (particularly married women) tend to enter the labor force If discouraged workers were counted as officially unemployed, the unemployment rate would be higher. All of the above statements are true, so none of the above is the correct answer. 6. The reservation wage is defined as: The wage of the reservations agent in the tourism or transport industry The maximum wage that an employer is willing to pay a worker for a given job The minimum wage that an employee is willing to accept for working at a given job.

The wage level where the substitution effect exactly offsets the income effect The wage rate at which no hours Of labor are supplied by the workers c 7. All of the following patterns of labor market behavior can be analyses with the income-leisure framework except: Moonlighting work Overtime work Labor force participation choices underemployment Wage determination procedures 8. In the neo-classical model of labor supply, which of the following is always true? A) A wage increase always causes an increase in hours worked. If there is an income effect, it must stem from a change in the wage.

The income effect and the substitution effect stemming from a wage change work in opposing directions The substitution effect causes the worker to work more hours if wages decrease None of the above statements are always true. 9. Over the backward-bending portion of the labor supply curve, which one of the following statements is true? The substitution effect of a wage change dominates the income effect Leisure becomes an inferior good The wage elasticity of labor supply turns from inelastic to elastic There is no longer a trade-off between income and leisure The wage elasticity of labor supply is negative 10.

For a worker who is deciding how many hours of labor to supply (at the intensive margin), all of the following are true except: (select the falsehood) a) The marginal rate of substitution between income and leisure is equal to the wage rate The rate at which she is willing to exchange leisure for income equals the rate at which the market allows her to do it. The marginal utility of leisure divided by the marginal utility of income is equal to the wage rate The income effect of a wage change equals the substitution effect The worker cannot increase total utility by working more or fewer hours given the wage ate and the non-labor income. 1 . What was the essence of the article from the literature that I posted concerning the ‘ ‘Working Income Tax Benefit’? The title of this article is “Time for a ‘made in Ontario’ Working Income Tax Benefit”. That taxes on most workers are too high. That social assistance recipients face fairly strong disincentives to enter the labor force and work That child care should be subsidized by the government, like it is in Quebec. That among social assistance recipients, the wage is greater than the marginal rate of substitution. None of the above 12.

Which of the following countries tends to have the lowest labor force participation rates? Continental European countries Canada united States United Kingdom There is no enduring ranking, as in some years one country will have higher rates, but in other years another country’s rates will surpass them 13. Consider the following figures from the December 2013 Labor Force Survey. Working-age population, 28. 8 million; labor force, 19. 1 million; employment, 17. 8 million; unemployment, 1. 3 million. The equation for the unemployment rate (OUR) OUR 17. 8/ 28. 8 1. 3/ 28. 8 OUR=1. 3/ 17. 8 OUR=1. 19. 1 19. 1 / 28. 8 14. What is the nature of a social insurance benefit that takes the form of a democrat? A) All recipients get the exact same amount. The benefits is paid on a sliding scale such that it is clawed back as the worker earns more Income The worker receives a tax credit The amount that recipients receive is independent of the number of hours worked. None Of the above 15. Which of the following is NOT a way to improve work incentives for welfare (or social assistance) recipients? Increase the market wages for jobs for which welfare recipients might be qualified to perform

Reduce the very high implicit tax rate that is applied to earnings Of welfare recipients when they work Alter the preferences that certain recipients might have for leisure compared to work Raise the benefit level Provide welfare recipients with job training and counseling services 16. What does the term negative refer to in a negative income tax scheme? A) The individual does not have to pay income tax on any of his/her earnings The individual receives a subsidy or a credit rather than paying taxes for a number of hours worked within a certain range. The program does not involve any disincentives to working

The program involves fewer disincentives to working than does a conventional welfare or social assistance program 17. Which of the following programs is thought to be superior in terms of its ability to direct payments to those individuals or families in greatest need of assistance? A) Social assistance or welfare Unemployment insurance A guaranteed annual income benefit Canada Pension Plan 18. The reason for which worker’s disability insurance can potentially have adverse effects on work incentives is because: The income that it provides enables one to reach a certain income level without any work blob ignition.

The opportunity cost of leisure increases. The recipient is allowed to work as many hours as he/she can without losing any of the benefits. The taxes that finance the benefits can have negative effects on labor demand All of the above apply 19. Consider a worker who has small children at home. All of the following are effects of child care expenses (not day-care subsidies) except: They serve to increase reservation wages They might decrease labor force participation For those who do participate, the hours of work are likely to be longer For those who do participate, the hours of work are likely to be shorter All of the above apply 20.

Which of the following statements concerning social assistance programs is false? A) The high implicit tax rate on welfare benefits is an important work disincentive. B) Lowering benefits can cause undue hardship on certain recipients, even if it increases incentives to work. C) The negative income tax program gives more incentives to work than a situation of a labor market with no welfare program at all. D) Under a negative income tax program, workers do face a callback in labor market earnings e) The disincentive effects brought on by Social assistance payments involve OTOH income effects and substitution effects. 1 . Canada’s unemployment insurance program has received much criticism from most (but not all) policy analysts. Their greatest concern is that: a) the ‘Employment Insurance’ regime (El) has evolved in some situations (particularly part-year workers) into an income maintenance program upon which some workers have developed a long-term dependency b) benefits are paid for too long a period, causing individuals to delay their job search c) it serves to insure workers from income loss associated with the risk of unpredictable unemployment d) it has an unfunded liability ) the premiums are judged to be too high 22.

The current value for the official rate of unemployment in Canada is: a) 6. 1% 7. 8 % 8. 7% 7. 0 % none of the above 23. The approximate value for the labor-force participation rate in Canada is: 76% 57% 80 % 67% 24. I briefly went over the circular flow model. Which of the following statements is false? The labor market fits into the input or factor market. In the input markets, it is the households who receive the income and the firms that do the spending.

In the OUtPUt markets, it is the firms who receive the income and the households that do the spending. In the aggregate, spending must be equal to income All of labor economics is based on micro-analysis, and so this model does not apply. 25. I have said a number of times that two labor market phenomena that have occurred over the past 25 years or so are a widening distribution of labor market earnings (I. E. A higher degree of inequality) and a decline in the share of aggregate income that is paid to labor.

What are thought to be the causes? Union busting and legislation that is anti-worker Technological change and globalization Unfavorable labor market conditions caused by recessions and their aftermath Government spending cuts that disproportionably hurt the disadvantaged Free trade with foreign countries II Short Answer Questions Answer all of the questions below in an exam booklet using complete sentences. Point form is not acceptable.