Quiz 5 Multiple Choice Identify the choice that best completes the statement or answers the question. ____

1. Which list includes all the categories into which Statistics Canada divides the adult population? a. employed or unemployed b. discouraged workers, employed, or unemployed c. employed, unemployed, or not in the labour force d. discouraged workers, employed, or not in the labour force e. None of the above are correct.

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2. Sally is on a temporary layoff from the factory where she makes plastic tableware. If Sally participates in the Statistics Canada survey, she will be classified as a. unemployed and in the labour force. b. unemployed and out of the labour force. c. employed and in the labour force. d. employed and out of the labour force.

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3. In Canada in recent years, the unemployment rate among those aged 15 to 24 has been a. less than that of older adults. b. about the same as that of older adults. c. much higher than that of older adults. d. approximately half that of older adults.

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4. Since World War II, the labour-force participation rate a. has increased for both men and women. b. increased for women and decreased for men. c. has decreased for both men and women. d. decreased for women and increased for men.

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5. If an unemployed person quits looking for work, ceteris paribus, the unemployment rate a. decreases, and the participation rate increases b. decreases, and the participation rate decreases c. stays the same, and the participation rate decreases d. and the labour force participation rate stay the same.

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6. Some people who are employed or who are not making serious effort to find employment will report themselves as unemployed. Some people who want to find work will be counted as out of the labour force. a. Both the first and the second fact tend to make the reported unemployment rate lower than the actual unemployment rate. b. Both the first and the second fact tend to make the reported unemployment rate higher than the actual unemployment rate. c. The first fact tends to make the reported unemployment rate higher than the actual unemployment rate. The second fact tends to make the reported unemployment rate lower than the actual rate. d. The first fact tends to make the reported unemployment rate lower than the actual unemployment rate. The second fact tends to make the reported unemployment rate higher than the actual rate.

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7. Which of the following is not a reason actual labour markets experience unemployment? a. unions

b. job search c. flexible wages d. minimum-wage legislation ____

8. From time to time the demand for workers has risen in one region of Canada and fallen in another. This illustrates a. frictional unemployment created by efficiency wages. b. structural unemployment created by efficiency wages. c. frictional unemployment created by sectoral shifts. d. structural unemployment created by sectoral shifts.

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9. Suppose that 2007, the demand for construction workers increased and the demands for textile and steel workers diminished. This illustrates a. frictional unemployment created by a sectoral shift. b. structural unemployment created by a sectoral shift. c. frictional unemployment created by efficiency wages. d. structural unemployment created by efficiency wages.

____ 10. Which of the following is incorrect? a. Frictional unemployment is inevitable in a dynamic economy. b. Although the unemployment created by sectoral shifts is unfortunate, in the long run such changes lead to higher productivity and higher living standards. c. At least 10 percent of Canadian manufacturing jobs are destroyed every year. d. In a typical month more than 5 percent of workers leave their jobs. Use the graph below to answer the following questions. Figure 28-2

____ 11. Refer to Figure 28-2. If the minimum wage rose from $5 to $7, unemployment would a. rise by 40. b. rise by 20. c. fall by 20. d. fall by 40. ____ 12. Collective bargaining refers to a. the process by which the government sets exemptions from the minimum wage law. b. setting the same wage for all employees to prevent jealousy among workers. c. firms colluding to set the wages of employees in order to keep them below equilibrium.

d. the process by which unions and firms agree on the terms of employment. ____ 13. When a union bargains successfully with employers, in that industry a. both the quantity of labour supplied and the quantity of labour demanded increase. b. both the quantity of labour supplied and the quantity of labour demanded decrease. c. the quantity of labour supplied increases and the quantity of labour demanded decreases. d. the quantity of labour supplied increases the quantity of labour demanded decreases. ____ 14. If competition laws were applied to unions, a. the natural rate of unemployment rate would increase, ceteris paribus. b. the natural rate of unemployment rate would decrease, ceteris paribus. c. the natural rate of unemployment rate would not change. d. the effect on the natural rate of unemployment rate is uncertain. ____ 15. Mary Sue is the newly appointed CEO of a company that manufactures CD drives on an assembly line. Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some workers may be shirking. According to efficiency wage theory, what should she do? a. pay all workers more than the equilibrium wage rate b. pay all workers below the equilibrium wage rate to make up for the loss from shirking c. make sure that workers are getting paid exactly the equilibrium wage rate d. reduce production ____ 16. Efficiency wages a. reduce labour-force participation rates. b. reduce the natural rate of unemployment. c. reduce the incentive to shirk. d. increase worker turnover. e. None of the above are correct. ____ 17. An efficient wage a. requires increased turnover. b. may decrease the cost of production. c. helps to reduce the level of unemployment. d. All of the above are correct. ____ 18. Which of the following causes of unemployment is not associated with an excess supply of labour? a. minimum-wage laws b. unions c. job search d. efficiency wages ____ 19. Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level? a. minimum-wage laws b. unions c. efficiency wages d. All of the above are correct. ____ 20. Which of the following causes of unemployment is not associated with a wage rate above the equilibrium level? a. unions b. efficiency wages c. job search

d. minimum-wage laws Short Answer 21. Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be? 22. Why might a favorable change to the economy such as technological change or a decrease in the price of imported oil be associated with an increase in frictional unemployment?

Quiz 5 Answer Section MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

C A C B B C C C A D A D C B A C B C D C

PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS:

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF: DIF:

Easy Easy Average Easy Average Average Easy Easy Easy Easy Average Easy Average Average Average Easy Easy Average Easy Easy

REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF: REF:

191 190-193 192 194 195 195-196 197-199 200 200 200 204 205 205-207 206 207-209 207-209 207-209 210 210 210

SHORT ANSWER 21. ANS: Most unemployed people in the economy are unemployed for relatively short periods of time, while fewer people are unemployed for relatively long periods of time. If you were to track the labour hours lost due to unemployment, it is likely that most of them would be among those who are unemployed for long periods of time. PTS: 1 DIF: Average REF: 196-197 22. ANS: Even generally favorable changes will usually involve some sort of sectoral shock that changes the demand of labour among different firms. For example a decrease in the price of imported oil would likely reduce the demand for Canadian oil workers and increase the demand for automobile workers. Technological progress makes some industries decline and others advance creating frictional unemployment. PTS: 1

DIF: Challenging

REF: 200-201