Contemporary Labor Economics Campbell McConnell 11th Edition

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Sample Test

Chapter 03 Test Bank KEY

1. Most of the variations in U.S. population growth have resulted from changes in

2. birthrates and net migration.

3. birthrates and death rates.

4. net migration and death rates.

5. birthrates and technological change.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01 Describe trends in the population and labor force.
Topic: The Population Base

2. Compared to the basic work-leisure choice model, Becker’s model of time allocation

3. considers the week rather than the day as the basic unit of time.

4. considers the household rather than the individual as the basic decision-making unit.

5. assumes that goods and services take no time to consume.

6. considers time spent in household work as work time rather than leisure time.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-02 Explain Becker’s model of the allocation of time.
Topic: Becker’s Model: The Allocation of Time

3. In Becker’s model of time allocation, the difference between “goods” and “commodities” is that commodities are produced

4. in markets, whereas goods are produced in households.

5. only with housework.

6. by combining goods with time.

7. in the market, whereas goods are produced in the home.

4. If a worker’s wage rate rises,

5. household production will shift away from goods-intensive commodities toward time-intensive commodities.

6. household production will shift away from time-intensive commodities toward goods-intensive commodities.

7. more leisure time will be consumed.

8. more leisure time will be consumed if the substitution effect outweighs the income effect.

5. A household will tend to substitute goods for time in the production of commodities if

6. a household member’s market wage increases.

7. a household member’s market wage decreases.

8. the substitution effect of a wage decrease exceeds the income effect.

9. the household’s total income decreases.

6. Compared to a high-wage worker, a low-wage worker will tend to

7. pursue more goods-intensive activities.

8. pursue more time-intensive activities.

9. pursue fewer time-intensive activities.

10. sacrifice time-intensive activities in favor of goods-intensive activities.

7. Which of the following best exemplifies the Becker substitution effect? An increase in the market wage leads a household to

8. eat more fast-food meals.

9. play more golf together.

10. have more children.

11. take fewer, but longer vacations.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02 Explain Becker’s model of the allocation of time.
Topic: Becker’s Model: The Allocation of Time

8. Which of the following best exemplifies the Becker income effect? An increase in the market wage leads a household to

9. substitute time for goods in the production of commodities.

10. consume fewer time-intensive commodities and more goods-intensive commodities.

11. consume more commodities.

12. have fewer children.

9. In a particular family, both spouse A and spouse B could earn $20 per hour in market work. However, spouse A has a comparative advantage in the production of home-produced goods. Becker’s model of time allocation predicts that

10. spouse B will be better able to substitute time for goods in the production of commodities.

11. spouse A and spouse B will divide market work and home production equally.

12. spouse A will tend to specialize in market work, spouse B in home production.

13. spouse A will tend to specialize in home production, spouse B in market work.

10. Which of the following is a member of the potential labor force?

11. a 75-year-old retired autoworker living at home

12. a 15-year-old student

13. a 60-year-old Alzheimer’s patient now living in a nursing home

14. a 35-year-old stockbroker convicted of fraud now serving a 10-year sentence

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03 Compute the labor force participation rate.
Topic: Population Rates: Defined and Measured

11. The labor force consists of all persons age 16 years and over who are

12. employed.

13. employed or are actively seeking employment.

14. employed, actively seeking employment, or have given up looking for employment.

15. not institutionalized.

12. The labor force participation rate

13. is the fraction of a given population that is classified as employed.

14. has been rising for males and declining for females.

15. tends to increase during a recession.

16. is the fraction of a given population that is classified either as employed or unemployed.

13. If U represents the number of unemployed persons, E the number of employed persons, and N the number in the potential labor force that are neither unemployed nor employed, the labor force participation rate can be found as

14. U + E

15. E/(U + E)

16. (U + E)/(E + N)

17. (U + E)/(U + E + N)

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03 Compute the labor force participation rate.
Topic: Population Rates: Defined and Measured

14. Given the following data, what is the labor force participation rate?

Population	300 million
Non-institutionalized population, age 16 and over	250 million
Persons employed or seeking employment	200 million
Unemployed persons	10 million

1. 10%

2. 75%

3. 80%

4. 84%

AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03 Compute the labor force participation rate.
Topic: Population Rates: Defined and Measured

15. Given the following data, what is the labor force participation rate?

Population	100 million
Non-institutionalized population, age 16 and over	75 million
Persons employed or seeking employment	50 million
Unemployed persons	5 million

1. 50%

2. 67%

3. 75%

4. 80%

AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03 Compute the labor force participation rate.
Topic: Population Rates: Defined and Measured

16. Consider the following data

Males in the labor force	100 million
Unemployed males	5 million
Non-institutionalized females, age 16 and over	110 million
Employed or unemployed females	88 million

Given the information in the table above, the male labor force participation rate _____ and the female labor force participation rate _____.

1. is 95%; is 80%

2. is 95%; is 88%

3. cannot be calculated from the data; is 80%

4. cannot be calculated from the data; cannot be calculated from the data

AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03 Compute the labor force participation rate.
Topic: Population Rates: Defined and Measured

17. The aggregate labor force participation rate in the U.S. is currently about

18. one-fourth.

19. one-half.

20. two-thirds.

21. three-fourths.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-04 Describe changes in labor force participation rates across demographic groups over the years and explain why these changes have occurred.
Topic: Secular Trend of Participation Rates

18. Since the mid-1980s, the labor force participation rate of women has _____ and the participation rate of men has _____.

19. risen; been unchanged.

20. risen; fallen.

21. fallen; risen.

22. risen; risen.

19. Compared to fifty years ago, the labor force participation rate of 25- to 54-year-old men has _____, the participation rate of 55- to 64-year-old men has _____, and the participation rate of men age 65 and over has _____.

20. risen; been fairly steady; risen

21. fallen; risen; risen

22. risen; fallen; been fairly steady

23. been fairly steady; fallen; fallen

20. Which one of the following is not a plausible explanation of the observed change in the participation rate of males age 65 and older since World War II?

21. growth in the percentage of the labor force covered by private pensions

22. cutbacks in Social Security benefits

23. the long-term growth of average real incomes and wealth

24. the increased generosity of the disability component of Social Security

21. Which one of the following gives rise to a retirement-inducing substitution effect? As workers approach retirement age,

22. Social Security benefits become available.

23. wealth becomes sufficient to make retirement affordable.

24. earnings potential decreases so that leisure becomes relatively more costly.

25. earnings potential decreases so that leisure becomes relatively less costly.

22. Which one of the following is not predicted to increase the labor force participation rate of married women?

23. rising wage rates for husbands

24. rising productivity in the household

25. declining birthrates

26. attempts to maintain living standards

23. Cross-sectional data suggest that, all else equal,

24. the male labor force participation rate varies inversely with education.

25. the labor force participation rate of single women varies inversely with the reservation wage.

26. the labor force participation rate of married men varies inversely with the number of children in the household.

27. the labor force participation rate of married women varies inversely with the husband’s income.

24. “For married women, the substitution effect of rising wage rates has apparently outweighed the income effect.” Empirical evidence suggests this statement is

25. true, because the labor force participation rate of women has been increasing.

26. true, because married women have had to work to maintain household living standards.

27. not true, because the labor force participation rate of women has been increasing.

28. not true, because the labor force participation rate of women has been declining.

25. According to the textbook, each of the following factors may have contributed to increased female labor force participation except

26. rising divorce rates.

27. expanding job accessibility.

28. fewer educational opportunities.

29. a desire to maintain household living standards.

26. The secular decline in the birthrate

27. has contributed to the increased labor force participation rate of women.

28. may partly be caused by the increasing opportunity cost of children as women’s wages have increased.

29. has contributed to the increased labor force participation rate of women and may partly be caused by the increasing opportunity cost of children as women’s wages have increased.

30. has not contributed to the increased labor force participation rate of women and is not partly caused by the increasing opportunity cost of children as women’s wages have increased.

27. Fuchs? research suggests the most important reasons for the increased labor force participation rate of women are

28. rising real wages and expansion of service sector jobs.

29. rising real wages and the feminist movement.

30. the feminist movement and passage of antidiscrimination legislation.

31. passage of antidiscrimination legislation and technological innovations in household production methods.

28. Compared to white females, the labor force participation rate of African-American females is _____. Compared to white males the labor force participation rate of African-American males is _____.

29. nearly identical; nearly identical

30. greater; lower

31. lower; greater

32. nearly identical; lower

29. In the mid 1950s, white males

30. were more likely to participate in the labor force than were African-American males.

31. were less likely to participate in the labor force than were African-American males.

32. and African-American males were about equally likely to participate in the labor force and that relationship still holds.

33. and African-American males were about equally likely to participate in the labor force but now white men have a higher participation rate.

30. Since 1950, the labor force participation rate of white women has

31. increased until it nearly equals that of African-American women.

32. fallen until it nearly equals that of African-American women.

33. increased and now significantly exceeds that of African-American women.

34. been steady since World War II.

31. Until recently, the labor force participation rate of African-American women has _____ the rate of white women. In recent years the labor force participation rate of African-American men has _____ the rate of white men.

32. been slightly less than; consistently exceeded

33. consistently exceeded; been slightly less than

34. consistently exceeded; consistently exceeded

35. been slightly less than; been slightly less than

32. A “supply side” explanation of the lower participation rate of African-American males compared to white males is that

33. African-Americans command lower wage rates and are usually last-hired and first-fired.

34. African-American workers are located in the inner city, while jobs are in the suburbs.

35. African-American women’s labor force participation rate is lower than that of white women.

36. opportunities outside the labor market, such as Social Security and public assistance, afford comparatively more attractive alternatives to African-Americans.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04 Describe changes in labor force participation rates across demographic groups over the years and explain why these changes have occurred.
Topic: Secular Trend of Participation Rates

33. The relatively low labor force participation rate of African-American males may be partly explained by

34. the relatively higher participation rate of African-American females.

35. the increased availability of public income maintenance programs.

36. lower average wages and job prospects available to African-American males.

37. All of the other choices are correct.

34. Which one of the following will tend to increase the likelihood of participation in the labor force for a current nonparticipant?

35. a decrease in the spouse’s wage

36. an increase in the spouse’s wage

37. an increase in family size

38. falling productivity in household production of commodities

35. Which one of the following statements is correct?

36. The added-worker effect and the discouraged-worker effect operate in the same direction.

37. The added-worker effect and the discouraged-worker effect operate in different directions.

38. The added-worker effect is relatively strong as the economy expands and wages rise.

39. The discouraged-worker effect is relatively strong as the economy expands and wages rise.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 Describe how the “added-worker effect” and the “discouraged-worker effect” influence labor force participation rates over the business cycle.
Topic: Cyclic Changes in Participation Rates

36. The added-worker effect suggests that

37. higher wages will attract more persons into the labor market during market expansions.

38. when one family member loses a job, other family members may enter the labor force.

39. the measured unemployment rate probably understates the true economic hardship associated with unemployment.

40. the labor force participation rate will fall as the unemployment rate rises.

37. Because of the _____, the unemployment rate as measured by the Bureau of Labor Statistics tends to understate the extent of unemployment during a recession.

38. counter-cyclical labor force participation rate

39. added-worker effect

40. decline in the average workweek

41. discouraged-worker effect

38. The discouraged-worker effect indicates that

39. married women will enter the labor force to maintain household living standards after their husbands? wages have fallen.

40. some unemployed persons in the labor force actively seek employment.

41. some unemployed workers will decide to withdraw from the labor force as the unemployment rate increases.

42. the labor force participation rate varies directly with the unemployment rate.

39. Empirical evidence suggests that the

40. added-worker effect dominates the discouraged-worker effect; the participation rate varies inversely with the unemployment rate.

41. discouraged-worker effect dominates the added-worker effect; the participation rate varies inversely with the unemployment rate.

42. added-worker effect dominates the discouraged-worker effect; the participation rate varies directly with the unemployment rate.

43. discouraged-worker effect dominates the added-worker effect; the participation rate varies directly with the unemployment rate.

40. Since the end of World War II, the average weekly hours of work in manufacturing has

41. been steady, in part due to increased education.

42. been steady, in part due to lower tax rates.

43. fallen steadily.

44. increased steadily.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-06 Cite the reasons for the workweek decline in the early twentieth century and the relative stability of the workweek since World War II.
Topic: Hours of Work: Two Trends

41. All else equal, rising real wages will

42. decrease average weekly work hours if the income effect exceeds the substitution effect.

43. increase average weekly work hours if the income effect exceeds the substitution effect.

44. decrease average weekly work hours if the substitution effect exceeds the income effect.

45. have no impact on average weekly work hours.

42. Research suggests that the widespread use of the birth control pill

43. accounts for over half the increase in the labor force participation rate of married women since 1950.

44. accounts for about one-third of the increase in the share of women in professional occupations between 1970 and 1990.

45. accounts for over two-thirds of the drop in the age of first marriage between 1970 and 1990.

46. had no measurable impact on the labor force participation rate of women.

43. Research by Hamermesh and Lee suggests that

44. high-income earners would be happier if they earned less.

45. less than 10% of U.S. married couples report feeling stressed for time.

46. although Germans work fewer hours than the Japanese, they report more time stress.

47. all else constant, higher earnings lead to greater time stress.

Chapter 03 Test Bank Summary

Category	# of Questions
AACSB: Analytic	3
AACSB: Reflective Thinking	40
Accessibility: Keyboard Navigation	40
Blooms: Apply	3
Blooms: Remember	35
Blooms: Understand	5
Difficulty: 1 Easy	35
Difficulty: 2 Medium	5
Difficulty: 3 Hard	3
Learning Objective: 03-01 Describe trends in the population and labor force.	1
Learning Objective: 03-02 Explain Becker’s model of the allocation of time.	8
Learning Objective: 03-03 Compute the labor force participation rate.	7
Learning Objective: 03-04 Describe changes in labor force participation rates across demographic groups over the years and explain why these changes have occurred.	19
Learning Objective: 03-05 Describe how the “added-worker effect” and the “discouraged-worker effect” influence labor force participation rates over the business cycle.	5
Learning Objective: 03-06 Cite the reasons for the workweek decline in the early twentieth century and the relative stability of the workweek since World War II.	3
Topic: Becker’s Model: The Allocation of Time	8
Topic: Cyclic Changes in Participation Rates	5
Topic: Hours of Work: Two Trends	3
Topic: Population Rates: Defined and Measured	7
Topic: Secular Trend of Participation Rates	19
Topic: The Population Base	1

Chapter 05 Test Bank KEY

1. The short run is defined as a period in which

2. the firm cannot change its output level.

3. all inputs are variable but technology is fixed.

4. input prices are fixed.

5. at least one resource is fixed.

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Explain how a firm’s short-run production function can be used to derive a demand curve for labor.
Topic: A Firm’s Short-Run Production Function

2. Refer to the graph below.

The “zone of production” consists of labor inputs over the range of

1. 0X.

2. YZ.

3. 0Y.

4. XZ.

AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 05-02 Explain how a firm’s short-run production function can be used to derive a demand curve for labor.
Topic: A Firm’s Short-Run Production Function

3. Refer to the graph below.

The slope of line segment 0D can be interpreted as the

1. total product of labor at Y.

2. average product of labor at Y.

3. value of labor’s marginal product at Y.

4. greatest possible marginal product of labor.

4. Refer to the graph below.

The slope of line segment 0D can be interpreted as the

1. marginal product of labor at Y.

2. total product of labor over the range 0Y.

3. value of labor’s marginal product at Y.

4. the greatest possible total product of labor.

5. Refer to the graph below.

For labor input levels between X and Y,

1. the marginal product of labor is falling, but is greater than the average product of labor.

2. both the marginal product and the average product of labor are falling.

3. the marginal product of labor is rising and the average product of labor is falling.

4. both the marginal product and the average product of labor are rising.

6. Refer to the graph below.

The “law of diminishing marginal returns” begins to take effect at labor input level

1. 0.

2. X.

3. Y.

4. Z.

7. Refer to the graph below.

At labor input Z, labor’s

1. average product is maximized.

2. marginal product is maximized.

3. marginal product is zero.

4. total product is zero.

8. In stage I of the production function, increases in the amount of labor will

9. increase the average productivity of both capital and labor.

10. increase the average productivity of capital but not labor.

11. increase the average productivity of labor but not capital.

12. decrease the average productivity of both capital and labor.

9. A competitive firm will never choose to operate in stage(s)

10. I or II.

11. I or III.

12. II or III.

13. III only.

10. Which of the following best describes the “law of diminishing marginal returns”?

11. The marginal product of labor is negative.

12. Output per worker must eventually fall.

13. As more labor is added to a fixed stock of capital, total output must eventually fall.

14. As more labor is added to a fixed stock of capital, labor’s marginal product must eventually fall.

11. Which of the following equalities holds when the profit-maximizing quantity of labor is employed in the short run?

12. MRP = MWC

13. MP = wage rate

14. MRP = AP

15. MRP = 0

12. The short-run labor demand curve of a competitive firm is

13. its average revenue product curve.

14. its marginal revenue product curve, provided marginal product is below average product.

15. its marginal product curve.

16. stage II of the total product curve.

13. Value of marginal product (VMP) differs from marginal revenue product (MRP) in that

14. MRP measures the value society places on the next worker’s output, while VMP measures the value the firm places on the next worker’s output.

15. VMP measures the value society places on the next worker’s output, while MRP measures the value the firm places on the next worker’s output.

16. MRP always exceeds VMP.

17. VMP always exceeds MRP.

14. Refer to the following table.

Labor	Output	Price (D₁)	Price (D₂)
0	0	$10.00	$10.00
1	16	10.00	9.50
2	31	10.00	9.00
3	45	10.00	8.50
4	58	10.00	7.50
5	69	10.00	6.50
6	78	10.00	5.50

Assume that the labor market is perfectly competitive. Suppose the firm’s product demand is given by the column labeled D₁. If the wage rate is $100, the firm will achieve maximum profit by hiring _____ workers.

1. 3

2. 4

3. 5

4. 6

AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Explain how a firm’s short-run production function can be used to derive a demand curve for labor.
Topic: Short-Run Demand for Labor: The Perfectly Competitive Seller

15. Refer to the following table.

Labor	Output	Price (D₁)	Price (D₂)
0	0	$10.00	$10.00
1	16	10.00	9.50
2	31	10.00	9.00
3	45	10.00	8.50
4	58	10.00	7.50
5	69	10.00	6.50
6	78	10.00	5.50

Assume that the labor market is perfectly competitive. Suppose the firm’s product demand is given by the column labeled D₁. If the wage rate rises from $100 to $135, the firm will reduce the quantity of labor employed by _____ unit(s).

1. 0

2. 1

3. 2

4. 3

16. Refer to the following table.

Labor	Output	Price (D₁)	Price (D₂)
0	0	$10.00	$10.00
1	16	10.00	9.50
2	31	10.00	9.00
3	45	10.00	8.50
4	58	10.00	7.50
5	69	10.00	6.50
6	78	10.00	5.50

Assume that the labor market is perfectly competitive. Suppose the firm’s product demand is given by the column labeled D₁. If the wage rate is $125, the firm will achieve maximum profit by hiring _____ workers.

1. 3

2. 4

3. 5

4. 6

17. Refer to the following table.

Labor	Output	Price (D₁)	Price (D₂)
0	0	$10.00	$10.00
1	16	10.00	9.50
2	31	10.00	9.00
3	45	10.00	8.50
4	58	10.00	7.50
5	69	10.00	6.50
6	78	10.00	5.50

Assume that the labor market is perfectly competitive. Suppose the firm’s product demand is given by the column labeled D₁. The value of the marginal product of the fourth worker is

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