File Name: labour economics multiple choice questions and answers .zip
Labour economics seeks to understand the functioning and dynamics of the markets for wage labour. Labour is a commodity that is supplied by labourers in exchange for a wage paid by demanding firms. Labour markets or job markets function through the interaction of workers and employers.
Labour economics looks at the suppliers of labour services workers and the demanders of labour services employers , and attempts to understand the resulting pattern of wages, employment, and income.
These patterns exist because each individual in the market is presumed to make rational choices based on the information that they know regarding wage, desire to provide labour, and desire for leisure. Labour markets are normally geographically bounded, but the rise of the internet has brought about a 'planetary labour market' in some sectors.
Labour is a measure of the work done by human beings. It is conventionally contrasted with other factors of production , such as land and capital. Some theories focus on human capital , or entrepreneurship , which refers to the skills that workers possess and not necessarily the actual work that they produce. Labour is unique to study because it is a special type of good that cannot be separated from the owner i. A labour market is also different from other markets in that workers are the suppliers and firms are the demanders.
There are two sides to labour economics. Labour economics can generally be seen as the application of microeconomic or macroeconomic techniques to the labour market. Microeconomic techniques study the role of individuals and individual firms in the labour market. Macroeconomic techniques look at the interrelations between the labour market, the goods market, the money market, and the foreign trade market. It looks at how these interactions influence macro variables such as employment levels, participation rates, aggregate income and gross domestic product.
The labour market in macroeconomic theory shows that the supply of labour exceeds demand, which has been proven by salary growth that lags productivity growth. When labour supply exceeds demand, salary faces downward pressure due to an employer's ability to pick from a labour pool that exceeds the jobs pool. However, if the demand for labour is larger than the supply, salary increases, as employee have more bargaining power while employers have to compete for scarce labour.
The Labour force LF is defined as the number of people of working age , who are either employed or actively looking for work unemployed.
The non-labour force includes those who are not looking for work, those who are institutionalized such as in prisons or psychiatric wards , stay-at-home spouses, children not of working age, and those serving in the military. The unemployment level is defined as the labour force minus the number of people currently employed. The unemployment rate is defined as the level of unemployment divided by the labour force.
The employment rate is defined as the number of people currently employed divided by the adult population or by the population of working age. In these statistics , self-employed people are counted as employed. The skills required in a labour force can vary from individual to individual, as well as from firm to firm. Some firms have specific skills they are interested in, limiting the labour force to certain criteria.
A firm requiring specific skills will help determine the size of the market. Variables like employment level, unemployment level, labour force, and unfilled vacancies are called stock variables because they measure a quantity at a point in time.
They can be contrasted with flow variables which measure a quantity over a duration of time. Changes in the labour force are due to flow variables such as natural population growth, net immigration, new entrants, and retirements. Changes in unemployment depend on inflows non-employed people starting to look for jobs and employed people who lose their jobs that are looking for new ones and outflows people who find new employment and people who stop looking for employment.
When looking at the overall macroeconomy, several types of unemployment have been identified, which can be separated into two categories of natural and unnatural unemployment.
Neoclassical economists view the labour market as similar to other markets in that the forces of supply and demand jointly determine the price in this case the wage rate and quantity in this case the number of people employed. However, the labour market differs from other markets like the markets for goods or the financial market in several ways.
In particular, the labour market may act as a non-clearing market. While according to neoclassical theory most markets quickly attain a point of equilibrium without excess supply or demand, this may not be true of the labour market: it may have a persistent level of unemployment.
Contrasting the labour market to other markets also reveals persistent compensating differentials among similar workers. Models that assume perfect competition in the labour market, as discussed below, conclude that workers earn their marginal product of labour.
Households are suppliers of labour. In microeconomic theory, people are assumed to be rational and seeking to maximize their utility function. In the labour market model, their utility function expresses trade-offs in preference between leisure time and income from time used for labour. However, they are constrained by the hours available to them. The individual's problem is to maximise utility U , which depends on total income available for spending on consumption and also depends on the time spent in leisure, subject to a time constraint, with respect to the choices of labour time and leisure time:.
This is shown in the graph below, which illustrates the trade-off between allocating time to leisure activities and allocating it to income-generating activities. The linear constraint indicates that every additional hour of leisure undertaken requires the loss of an hour of labour and thus of the fixed amount of goods that that labour's income could purchase.
Individuals must choose how much time to allocate to leisure activities and how much to working. This allocation decision is informed by the indifference curve labelled IC 1. The curve indicates the combinations of leisure and work that will give the individual a specific level of utility.
The point where the highest indifference curve is just tangent to the constraint line point A , illustrates the optimum for this supplier of labour services. If consumption is measured by the value of income obtained, this diagram can be used to show a variety of interesting effects. This is because the absolute value of the slope of the budget constraint is the wage rate.
The point of optimisation point A reflects the equivalency between the wage rate and the marginal rate of substitution  of leisure for income the absolute value of the slope of the indifference curve. Because the marginal rate of substitution of leisure for income is also the ratio of the marginal utility of leisure MU L to the marginal utility of income MU Y , one can conclude:.
If the wage rate increases, this individual's constraint line pivots up from X,Y 1 to X,Y 2. To understand what effect this might have on the decision of how many hours to work, one must look at the income effect and substitution effect. The wage increase shown in the previous diagram can be decomposed into two separate effects.
The pure income effect is shown as the movement from point A to point C in the next diagram. Employment time decreases by the same amount as leisure increases. But that is only part of the picture. As the wage rate rises, the worker will substitute away from leisure and into the provision of labour—that is, will work more hours to take advantage of the higher wage rate, or in other words substitute away from leisure because of its higher opportunity cost.
This substitution effect is represented by the shift from point C to point B. The net impact of these two effects is shown by the shift from point A to point B. The relative magnitude of the two effects depends on the circumstances.
In some cases, such as the one shown, the substitution effect is greater than the income effect in which case more time will be allocated to working , but in other cases, the income effect will be greater than the substitution effect in which case less time is allocated to working.
The intuition behind this latter case is that the individual decides that the higher earnings on the previous amount of labour can be "spent" by purchasing more leisure. If the substitution effect is greater than the income effect, an individual's supply of labour services will increase as the wage rate rises, which is represented by a positive slope in the labour supply curve as at point E in the adjacent diagram, which exhibits a positive wage elasticity.
This positive relationship is increasing until point F, beyond which the income effect dominates the substitution effect and the individual starts to reduce the number of labour hours he supplies point G as wage increases; in other words, the wage elasticity is now negative. The direction of the slope may change more than once for some individuals, and the labour supply curve is different for different individuals.
Other variables that affect the labour supply decision, and can be readily incorporated into the model, include taxation, welfare, work environment, and income as a signal of ability or social contribution. A firm's labour demand is based on its marginal physical product of labour MPP L. This is defined as the additional output or physical product that results from an increase of one unit of labour or from an infinitesimal increase in labour.
See also Production theory basics. Labour demand is a derived demand; that is, hiring labour is not desired for its own sake but rather because it aids in producing output, which contributes to an employer's revenue and hence profits.
With a perfectly competitive goods market, the MRP is calculated by multiplying the price of the end product or service by the Marginal Physical Product of the worker. If the MRP is greater than a firm's Marginal Cost, then the firm will employ the worker since doing so will increase profit.
The MRP of the worker is affected by other inputs to production with which the worker can work e. It is typical in economic models for greater availability of capital for a firm to increase the MRP of the worker, all else equal. Education and training are counted as " human capital ". Since the amount of physical capital affects MRP, and since financial capital flows can affect the amount of physical capital available, MRP and thus wages can be affected by financial capital flows within and between countries, and the degree of capital mobility within and between countries.
According to neoclassical theory, over the relevant range of outputs, the marginal physical product of labour is declining law of diminishing returns. That is, as more and more units of labour are employed, their additional output begins to decline.
Additionally, although the MRP is a good way of expressing an employer's demand, other factors such as social group formation can the demand, as well as the labour supply. This constantly restructures exactly what a labour market is, and leads way to cause problems for theories of inflation. The marginal revenue product of labour can be used as the demand for labour curve for this firm in the short run.
In imperfect markets, the diagram would have to be adjusted because MFC L would then be equal to the wage rate divided by marginal costs.
Because optimum resource allocation requires that marginal factor costs equal marginal revenue product, this firm would demand L units of labour as shown in the diagram. The demand for labour of this firm can be summed with the demand for labour of all other firms in the economy to obtain the aggregate demand for labour.
Likewise, the supply curves of all the individual workers mentioned above can be summed to obtain the aggregate supply of labour. These supply and demand curves can be analysed in the same way as any other industry demand and supply curves to determine equilibrium wage and employment levels.
For example, the wages of a doctor and a port cleaner, both employed by the NHS , differ greatly. There are various factors concerning this phenomenon. This includes the MRP of the worker. A doctor's MRP is far greater than that of the port cleaner. In addition, the barriers to becoming a doctor are far greater than that of becoming a port cleaner. To become a doctor takes a lot of education and training which is costly, and only those who excel in academia can succeed in becoming doctors.
The port cleaner, however, requires relatively less training. The supply of doctors is therefore significantly less elastic than that of port cleaners. Demand is also inelastic as there is a high demand for doctors and medical care is a necessity, so the NHS will pay higher wage rates to attract the profession.
Here's a 10 question multi-choice quiz on labour markets. It uses a 'confidence-based' approach to scoring. This means that, as well as stating which answer you think is correct you must state whether your confidence in that answer is 'high', 'medium' or 'low'. Your score per question is determined by getting answers correct and the confidence level that you state. Be warned! State a high confidence level and get the answer wrong, you lose points!
Multiple Choice Questions. Chapter 1 Introduction. Chapter 2 Labor Markets. Chapter 3 Labor Supply. Chapter 4 Labor Demand. Chapter 5 Job Attributes.
Labour Economics is devoted to publishing international research on empirical, theoretical and econometric topics that are of particular interest to labour economists.
Launch Quiz. Designed to help you test your knowledge of chapter material, multiple-choice Chapter Quizzes provide instant feedback that helps you determine what you know and what you need to review. Page references direct you to the material in the book. You can tailor this self-test quiz to give you 5, 10, 15 or more questions. You may select only one answer per question.
Use the mid-point formula in your calculation. Own-price elasticity of demand is equal to:. If own-price elasticity of demand equals 0. Suppose you are told that the own-price elasticity of supply equal 0. Which of the following is the correct interpretation of this number? Suppose that a 10 increase in price results in a 50 percent decrease in quantity demanded.
При чем здесь таблица умножения? - подумала Сьюзан. - Что он хочет этим сказать. - Четыре на шестнадцать, - повторил профессор. - Лично я проходил это в четвертом классе. Сьюзан вспомнила стандартную школьную таблицу. Четыре на шестнадцать.
Он всегда поощрял сотрудников к анализу и прояснению всяческих нестыковок в каждодневных делах, какими бы незначительными они ни казались. И вот теперь он требует, чтобы они проигнорировали целый ряд очень странных совпадений. Очевидно, директор что-то скрывает, но Бринкерхоффу платили за то, чтобы он помогал, а не задавал вопросы.
Я не могу. - Разумеется, не можете. Его же не существует. - Коммандер, я должна… - попробовала вставить слово Сьюзан. И снова Стратмор нетерпеливым взмахом руки заставил ее замолчать.
Ладно, - нахмурилась Сьюзан. - Попробуем еще… Кухня. - Спальня, - без колебаний отозвался .
Но кровь… - Поверхностная царапина, мадам. Мы залепили ее пластырем.
Сьюзан Флетчер минуту назад прошествовала в туалет, поэтому она ему тоже не помеха. Единственной проблемой оставался Хейл. Чатрукьян посмотрел на комнату Третьего узла - не следит ли за ним криптограф.
Беккеру даже сделалось дурно. - Прошу прощения. Офицер покачал головой, словно не веря своим глазам. - Я должен был вам рассказать… но думал, что тот тип просто псих. - Какой тип? - Беккер хмуро взглянул на полицейского.
На мгновение Беккер задумался.
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