Question 1 What do economists call the difference between expected earnings for

Question

Question 1

What do economists call the difference between expected earnings for a high school graduate and a college graduate?

College differential

College penalty

College bonus

College premium

Question 2

Economists have shown that the marginal productivity of labor has generally increased since 1995 due to the widespread adoption of computers in many businesses. What is the expected impact of this higher productivity on the demand for labor?

Labor demand shifts leftward

Labor demand shifts rightward

No change in labor demand

Question 3

New home prices have generally increased over the past three years in many parts of the US. What happens to the demand for construction labor as the price of new homes increases?

Construction labor demand shifts leftward

Construction labor demand shifts rightward

Construction labor demand does not change

Question 4

The demand for labor tends to be more inelastic in the long run and more elastic in the short run.

True

False

Question 5

Three key factors that influence the quantity of labor supplied as wage rates change: hours worked per employee, occupational choice, and migration. Which of these factors could lead to positive or negative changes in the quantity of labor supplied as wage rates increase?

Hours worked per worker

Occupational choice

Migration

All of the above

Question 6

The major oil companies have been seeking new off-shore petroleum reserves in locations that are farther from the coast and in deeper waters. As a result, the jobs on the off-shore drilling rigs have become more hazardous over time. What is the expected impact of this change on the labor supply curve and the wages for workers on off-shore drilling rigs?

Labor supply shifts leftward, equilibrium wage rises

Labor supply shifts leftward, equilibrium wage falls

Labor supply shifts rightward, equilibrium wage rises

Labor supply shifts rightward, equilibrium wage falls

Question 7

Which explanation for the college premium relies on asymmetric information (i.e., employers have less information about the skills held by job applicants than the applicants have about their own skills)?

Learning effect

Signaling effect

Question 8

What share of US market income was earned by the top 20% of earners in 2007?

About 2.5%

About 20%

About 40%

About 60%

Question 9

In general, federal government taxes and transfers help to redistribute income and provide a more uniform distribution of income in the US.

True

False

Question 10

Over the past few decades, the redistributional effects of federal tax and transfer programs have been less effective in creating a more uniform distribution of income in the US.

True

False

College differential

College penalty

College bonus

College premium

Explanation / Answer

1. College premium

2. Technological change causes the MP L function to change, generally to increase at each level of L. This shifts the labor demand curve to the right. Most technological change seems to be labor-augmenting – it raises the marginal product of labor. This can explain the fact that employment has risen historically along with wages. Inflation-adjusted wage increased by 131 percent from 1960-2000. (However labor saving technology can shift demand curve to the left in some industries)

3. The output price. When output price rises, the labor demand curve shifts to the right – more labor is demanded at each wage. When output price falls, less labor is demanded at each wage.

4. True ( population growth Is the ultimate limiting factor on labor supply)

5. All of the above

6. Labor supply shifts leftward and the equilibrium wage rate rises

7. Learning effect is the process by which education improves productivity and incomes

8. About 60%

9. True. The tax system in the US is progressive. Therefore we can expect a positive redistribution of income.

10. True. Accumulation of wealth and income by the top percentile of population has far exceeded the effect of redistribution of wealth by taxation.

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