chapter 10

Question 1

Value Marginal Product (VMP)

Answer 1

The Marginal Product of a

worker multiplied by the price of the output

Question 2

human capital

Answer 2

Education and training

Question 3

Screening theory

Answer 3

education and
training may be valuable to the individual, not because the training increases productivity, but because it
points out which employees will be good.

Question 4

Make Work Fallacy

Answer 4

The idea that jobs have value, regardless of whether the

labor actually creates value

Question 5

establishment survey

Answer 5

Government asking large businesses about how many employees are on their payroll, to measure the number of jobs the economy is creating.

Question 6

The BLS household survey asks

Answer 6

individuals about their employment status by telephone.

Question 7

The unemployment rate is

Answer 7

unemployed / civilian labor force

Question 8

The Labor Force Participation Rate (LFPR)

Answer 8

Labor Force / CNIP

It measures how many people
are interested in holding a job.

Question 9

Discouraged workers

Answer 9

are those who have looked for a job at some time during the previous 12 months,
but are no longer looking because they think no jobs are available.

Question 10

Frictional unemployment

Answer 10

occurs because of the normal workings of the labor force with people changing
jobs and entering the labor force with the skills that will likely soon yield a job.

Question 11

Structural unemployment

Answer 11

is a longer term problem which occurs due to changes in the labor force that
render some skills obsolete

Question 12

Cyclical unemployment

Answer 12

is what we usually think of as unemployment—it arises due to contractions that
occur during the business cycle

Question 13

Full employment is

Answer 13

When there is no cyclical unemployment. This means that a fully employed
economy has some frictional and structural unemployment.

Question 14

True False: the employer will hire an extra employee if his/her marginal product is positive

Answer 14

F the employer will hire an employee if the value of the marginal product is greater than the cost of having the employee

Question 15

average wage and average benefits in the US

Answer 15

average wage: $20

Average Benefits:$10

Question 16

True False: the labor supply curve gets its shape from the Law of diminishing returns.

Answer 16

F the labor supply curve gets its shape from

• the alternative value of the employees time
• the principle of optimal arrangement

Question 17

True False: at any wage the employee is willing to work for all the hours that the employer will offer

Answer 17

F at any wage there is a particular amount of labor supplied, that will only be equal to the amount of labor demanded at the equilibrium

Question 18

Social welfare programs…..

Answer 18

lower the supply of labor, causing wages to rise and unemployment to rise

Question 19

difference between screening theory and human capital theory

Answer 19

HCT says education makes a worker more productive ST says that education only points out which workers are already productive

Question 20

how does capital help productivity?

Answer 20

makes labor more productive increases the demand for labor

Question 21

True False: the age of railroads resulted in high unemployment rates as many transportation workers lost jobs

Answer 21

F more jobs were created as transportation costs fell

Question 22

effect of minimum wage laws

Answer 22

More workers willing to work but less workers being hired causing unemployment

Question 23

how establishment survey differs from household survey

Answer 23

establishment only asks employers about payroll not self employed people

Question 24

who is not in the civilian non-institutional population

Answer 24

people under 15
in the military
in an institution

Question 25

how many hours of work in a week makes you employed?

Answer 25

1 for pay or profit 15 for unpaid family business

Question 26

who is considered unemployed?

Answer 26

anyone with no job who has made effort within the last 4 weeks

Question 27

high unemployment rate

Answer 27

5.5%

Question 28

great depression highest unemployment rate

Answer 28

24% since then 11%

Question 29

people in CNIP but not in the labor force

Answer 29

stay at home parents, reitred, some students, bums

Question 30

major cause of teen unemployment today

Answer 30

large increases in the minimum wage

Question 31

trends in LFPR (men and women)

Answer 31

LFPR is down for both men and women it has fallen for men for decades but was climbing for women until the 2009 recession

Question 32

what is U-6?

Answer 32

unemployment rate that counts discouraged workers and those working part time that would like to be full time.

Question 33

what is full employment percentage

Answer 33

5.5%

Question 34

what is true of PPF if we have a surplus of labor

Answer 34

surplus of labor is unemployment which means it is below the curve

Question 35

what did keynes say about labor markets that was different than classical econ?

Answer 35

labor surpluses can last a long time becasue wages refuse to fall

Question 36

what 2 reasons did keynes give for wages refusing to fall

Answer 36

labor contracts which prevent employers from cutting wages

People mistake nominal wage cuts with real wage cuts.