Labour Market Economics (9th Canadian Edition) by Benjamin – Solution Manual | Complete Worked Solutions for All Chapters

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LABOUR MARKET
ECONOMICS




BENJAMIN • GUNDERSON • LEMIEUX • RIDDELL

,SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Consider figure 2.98 in the textbook. Given a wage increase from W0 to W1, the distance between I'
and I1 represents:
A) The equilibrium choice for leisure
B) The income effect
C) The equilibrium choice for hours worked
D) The substitution effect
E) The net effect of both the substitution effect and the income effect
Answer: B

2) Empirical literature on labour supply patterns for married women tends to find all of the following,
except:
A) The higher the husband's income, the higher the labour force participation rate.
B) Women with children have lower rates of labour force participation.
C) The higher the education level, the higher the labour force participation rate.
D) Labour market participation rate for married women was highest in the 35-44 age group.
E) Participation rate for all women is around 76 percent.
Answer: A

3) Which of the following statements concerning the elasticity of labour supply is false?
A) The overall labour supply for both sexes is likely to be downward sloping.
B) The overall labour supply for both sexes is likely to be upward sloping
C) It is generally higher for women than for men.
D) The elasticity of labour supply with respect to income is negative.
E) The compensated elasticity (reflecting the substitution effect) tends to be higher in magnitude
than the uncompensated, gross elasticity.
Answer: A

4) Which of the following statements is false?
A) In periods of low unemployment, discouraged workers tend to re-enter the labour force.
B) Discouraged workers contribute to the phenomenon of hidden unemployment.
C) In periods of high unemployment, discouraged workers tend to withdraw from the labour force.
D) In periods of high unemployment, added workers may increase labour market participation
rate.
E) In periods of high unemployment, added workers (particularly married women) tend to enter
the labour force.
Answer: D




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,5) Suppose a worker is observed to be working but is forced to work fewer hours than she really wants
to work. Which of the following statements is true?
A) She is on an indifference curve which is higher than the one which is tangent to the budget line.
B) She is on an indifference curve which is lower than the one which is tangent to the budget line.
C) The indifference curve that she is on is tangent to the budget line.
D) She is on an indifference curve which is lower than the one which passes through the point on
the budget line corresponding to zero hours of work.
E) She is not on an indifference curve.
Answer: B

6) The slope of the indifference curve at the lower left-hand corner of the income/leisure diagram,
where zero hours are supplied to the labour market, is equal to:
A) the slope of the budget constraint.
B) the reservation wage.
C) the difference between the market wage and the reservation wage
D) the prevailing market wage.
E) the level of non-market income.
Answer: B

7) The reservation wage is defined as:
A) the wage rate at which zero hours of labour is supplied by the workers.
B) the equilibrium wage.
C) the wage of the reservation clerk in the tourism industry.
D) the minimum wage that an employee is willing to accept for a given job.
E) the maximum wage that an employer is willing to pay a worker for a given job.
Answer: D

8) All of the following patterns of labour market behaviour can be analyzed with the income-leisure
framework, except:
A) worksharing
B) underemployment
C) moonlighting
D) overtime work
E) labour force participation
Answer: A




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, 9) Consider the situation of a worker who is 'at the corner equilibrium' i.e., he or she is supplying zero
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hours of work and consuming 16 hours of leisure. In context of the income-leisure framework,
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which of the following statements is false?
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A) The marginal rate of substitution is greater than the wage rate in absolute value terms.
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B) The rate at which the worker is willing to exchange income for leisure is not equal to the
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market rate for the exchange of income for leisure.
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C) Marginally, the worker values an hour of leisure more than she values an hour's worth of
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income. n



D) The indifference curve is flatter than the budget line.
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E) The indifference curve is steeper than the budget line.
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Answer: D n




10) Which one of the following regarding to an individual's budget constraint is correct?
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A) The level of non-labour income is higher for a part-time worker than for a full-time worker
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B) The slope of the budget constraint is determined by the market wage rate.
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C)The slope of the budget constraint is higher for a full-time worker than for a part-time worker.
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D) The slope of the budget constraint is determined by the reservation wage rate
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E) The level of non-labour income determines the intercept of the budget constraint.
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Answer: n B

11) In the neo-classical model of labour supply, which of the following is always true?
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A) The substitution effect causes the worker to work more hours if wages increase.
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B) The income effect and the substitution effect work in the same direction.
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C) If leisure is a normal good, a wage increase causes a decrease in hours worked.
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D) The income effect causes the worker to work more hours if wage increase.
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E) If leisure is a normal good, a wage increase causes an increase in hours worked.
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Answer: A n




12) Over the backward bending portion of the labour supply curve,
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A) There is no longer a trade-off between income and leisure.
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B) Leisure becomes an inferior good. n n n n



C)The wage elasticity of labour supply is negative.
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D) The substitution effect of a wage change dominates the income effect.
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E) The wage elasticity of labour demand is inelastic.
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Answer: C n




13) For a worker who is deciding how many hours of labour to supply, all of the following are true
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n except that: n



A) The income effect of a wage change equals the substitution effect.
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B) The rate at which she is willing to exchange leisure for income equals the rate at which the
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market allows her to do it.
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C) The marginal rate of substitution between income and leisure is equal to the wage rate.
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D) The worker cannot increase total utility by working more or fewer hours.
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E) The slope of the budget line equals the slope of the indifference curve.
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Answer: A n




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