TEST BANK
LABOUR MARKET ECONOMICS
9TH CANADIAN EDITION
CHAPTER NO. 01: INTRODUCTION TO LABOUR MARKET ECONOMICS
(Test Bank not Available)
CHAPTER NO. 2: LABOUR SUPPLY: INDIVIDUAL ATTACHMENT TO THE LABOUR
MARKET
MULTIPLE CHOICE QUESTION & ANSWERS
1) Empirical literature on labour supply patterns for married women tends to find all of the
following, except:
A) Labour market participation rate for married women was highest in the 35-44 age
group.
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) The strong negative relationship between the husband's income and the labour
force participation rate for married women.
E) Participation rate for all married women is around 75 percent.
ANSWER D
2) Which of the following statements concerning the elasticity of labour supply is true?
A) The total wage elasticity of supply tends to be positive and of low magnitude.
B) The income elasticity of supply tends to be positive and of low magnitude
C) The compensated elasticity of supply is close to zero
D) Overall workers tend to be highly responsive to wage changes
E) None of these above statements are true
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 backward bending.
B) It is generally higher for women than for men.
C) The compensated elasticity (reflecting the substitution effect) tends to be higher in
magnitude than the uncompensated, gross elasticity.
D) The overall labour supply for both sexes is likely to be upward sloping
E) The elasticity of labour supply with respect to income is negative.
ANSWER A
4) Which of the following statements is false?
A) In periods of high unemployment, discouraged workers tend to withdraw from the
labour force.
B) In periods of low unemployment, discouraged workers tend to re-enter the labour
force.
C) Discouraged workers are part of the hidden unemployment phenomenon
D) Discouraged workers are considered to be marginally attached to the labour force
E) Discouraged workers behave in a similar fashion as added workers.
ANSWER E
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) The indifference curve that she is on is tangent to the budget line.
B) She is on an indifference curve which is lower than the one which is tangent to her
budget line.
C) She is on an indifference curve which is higher than the one which is tangent to her
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 right-hand corner of the income/leisure
diagram, where zero hours of work are supplied to the labour market, is equal to:
, A) the prevailing market wage.
B) the reservation wage.
C) the level of non-market income.
D) the slope of the budget constraint.
E) the difference between the market wage and the reservation wage
ANSWER B
7) The reservation wage is defined as:
A) the wage of the reservation clerk in the tourism industry.
B) the maximum wage that an employer is willing to pay a worker for a given job.
C) the minimum wage that an employee is willing to accept for a given job.
D) the equilibrium wage.
E) the wage rate at which zero hours of labour is supplied by the workers.
ANSWER C
8) All of the following patterns of labour market behaviour can be analyzed with the income-
leisure framework, except:
A) moonlighting
B) overtime work
C) labour force participation
D) underemployment
E) worksharing
ANSWER E
9) Consider the situation of a worker who is ‘at the corner equilibrium' i.e., he or she is
supplying zero hours of work and consuming 16 hours of leisure. In context of the income-
leisure framework, which of the following statements is false?
, A) The indifference curve is steeper than the budget line.
B) The marginal rate of substitution between income and leisure is greater than the
wage rate in absolute value terms.
C) The indifference curve is flatter than the budget line.
D) The rate at which the worker is willing to exchange income for leisure is not equal to
the market rate for the exchange of income for leisure.
E) Marginally, the worker values an hour of leisure more than she values an hour's
worth of income.
ANSWER C
10) Which one of the following regarding to an individual's budget constraint is correct?
A) The slope of the budget constraint is determined by the market wage rate.
B) The level of non-labour income determines the intercept of the budget constraint.
C) The slope of the budget constraint is determined by the reservation wage rate
D) The slope of the budget constraint is equal to the marginal rate of substitution
between income and leisure
E) The slope of the budget constraint is higher for a full-time worker than for a part-time
worker.
ANSWER A
11) In the neo-classical model of labour supply, which of the following is always true?
A) If leisure is a normal good, a wage increase causes an increase in hours worked.
B) If leisure is a normal good, a wage increase causes a decrease in hours worked.
C) The income effect and the substitution effect work in the same direction.
D) The substitution effect causes the worker to work more hours if wages increase.
E) None of these options
ANSWER D
LABOUR MARKET ECONOMICS
9TH CANADIAN EDITION
CHAPTER NO. 01: INTRODUCTION TO LABOUR MARKET ECONOMICS
(Test Bank not Available)
CHAPTER NO. 2: LABOUR SUPPLY: INDIVIDUAL ATTACHMENT TO THE LABOUR
MARKET
MULTIPLE CHOICE QUESTION & ANSWERS
1) Empirical literature on labour supply patterns for married women tends to find all of the
following, except:
A) Labour market participation rate for married women was highest in the 35-44 age
group.
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) The strong negative relationship between the husband's income and the labour
force participation rate for married women.
E) Participation rate for all married women is around 75 percent.
ANSWER D
2) Which of the following statements concerning the elasticity of labour supply is true?
A) The total wage elasticity of supply tends to be positive and of low magnitude.
B) The income elasticity of supply tends to be positive and of low magnitude
C) The compensated elasticity of supply is close to zero
D) Overall workers tend to be highly responsive to wage changes
E) None of these above statements are true
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 backward bending.
B) It is generally higher for women than for men.
C) The compensated elasticity (reflecting the substitution effect) tends to be higher in
magnitude than the uncompensated, gross elasticity.
D) The overall labour supply for both sexes is likely to be upward sloping
E) The elasticity of labour supply with respect to income is negative.
ANSWER A
4) Which of the following statements is false?
A) In periods of high unemployment, discouraged workers tend to withdraw from the
labour force.
B) In periods of low unemployment, discouraged workers tend to re-enter the labour
force.
C) Discouraged workers are part of the hidden unemployment phenomenon
D) Discouraged workers are considered to be marginally attached to the labour force
E) Discouraged workers behave in a similar fashion as added workers.
ANSWER E
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) The indifference curve that she is on is tangent to the budget line.
B) She is on an indifference curve which is lower than the one which is tangent to her
budget line.
C) She is on an indifference curve which is higher than the one which is tangent to her
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 right-hand corner of the income/leisure
diagram, where zero hours of work are supplied to the labour market, is equal to:
, A) the prevailing market wage.
B) the reservation wage.
C) the level of non-market income.
D) the slope of the budget constraint.
E) the difference between the market wage and the reservation wage
ANSWER B
7) The reservation wage is defined as:
A) the wage of the reservation clerk in the tourism industry.
B) the maximum wage that an employer is willing to pay a worker for a given job.
C) the minimum wage that an employee is willing to accept for a given job.
D) the equilibrium wage.
E) the wage rate at which zero hours of labour is supplied by the workers.
ANSWER C
8) All of the following patterns of labour market behaviour can be analyzed with the income-
leisure framework, except:
A) moonlighting
B) overtime work
C) labour force participation
D) underemployment
E) worksharing
ANSWER E
9) Consider the situation of a worker who is ‘at the corner equilibrium' i.e., he or she is
supplying zero hours of work and consuming 16 hours of leisure. In context of the income-
leisure framework, which of the following statements is false?
, A) The indifference curve is steeper than the budget line.
B) The marginal rate of substitution between income and leisure is greater than the
wage rate in absolute value terms.
C) The indifference curve is flatter than the budget line.
D) The rate at which the worker is willing to exchange income for leisure is not equal to
the market rate for the exchange of income for leisure.
E) Marginally, the worker values an hour of leisure more than she values an hour's
worth of income.
ANSWER C
10) Which one of the following regarding to an individual's budget constraint is correct?
A) The slope of the budget constraint is determined by the market wage rate.
B) The level of non-labour income determines the intercept of the budget constraint.
C) The slope of the budget constraint is determined by the reservation wage rate
D) The slope of the budget constraint is equal to the marginal rate of substitution
between income and leisure
E) The slope of the budget constraint is higher for a full-time worker than for a part-time
worker.
ANSWER A
11) In the neo-classical model of labour supply, which of the following is always true?
A) If leisure is a normal good, a wage increase causes an increase in hours worked.
B) If leisure is a normal good, a wage increase causes a decrease in hours worked.
C) The income effect and the substitution effect work in the same direction.
D) The substitution effect causes the worker to work more hours if wages increase.
E) None of these options
ANSWER D
