ECON303 Final Exam - Labor Economics | Practice Test / Quiz / MCQs

1. Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) as in the simple neoclassical model of labor supply and is given by the function: U=3YL^1/3. The marginal rate of substitution (MRS) is given by which of the following?

Y/3L2/3Y/3LL/3YY/3

2. Given the following data, calculate the labor force participation rate.

Population	50 million
Number of unemployed	5 million
Out of labor force	20 million

40%50%10%60%

3. Assume there are two periods: t = 1 is today, and t = 2 is tomorrow. An individual can choose to go to college today and work tomorrow, or he can choose not to go to college and work in both periods. If the individual does not attend college, he earns $100 in each period. If he goes to college today, he only earns $200 tomorrow. Assuming the discount rate is 0.5, what choice will the individual make, and why?

The individual will choose to go either way, because there is no difference in earnings whether or not he attends college.There is not enough information provided for the individual to make the decision.The individual will choose to go to college, because the present value of earnings from attending college is greater than the present value of earnings from not attending college.The individual will choose not to go to college, because the present value of earnings from not attending college is greater than the present value of earnings from attending college.

4. Which of the following activities DOES NOT fall under the realm of union activity?

Collective bargaining with employers over contractsPolitical lobbyingProviding job training to union membersCollaborating to enhance a firm's research and development

5. If a minimum wage is imposed on a monopsonist, all of the following labor market effects take place, EXCEPT:

There is an increase in the wage rate to the workers.There is an increase in the number of workers hired.There is a decrease in the number of workers hired.There is a decrease in monopsonist profits.

6. If the prevailing wages are higher than the market wages but unemployment levels are very low, then which of the following is accurate?

Firms would be firing workers, if the workers were not performing well.Workers would be motivated to work more.The effort put in by the workers would be immeasurable.Workers would mostly be found shirking work.

7. Which of the following nonpecuniary aspect of job differences would NOT qualify for compensating wage differential amongst firms?

Work environmentSafety issuesLocation of the firmNumber of computers in the firm

8. Assuming that leisure is a normal good, an increase in wage will cause the quantity of labor supplied to do which of the following?

Increase, provided the substitution effect outweighs the income effectIncrease, if the individual has no vacation timeIncrease, depending on the employerIncrease, provided the income effect outweighs the substitution effect

9. Assume there are no labor market frictions. If the equilibrium wage rate in country A is greater than the equilibrium wage rate in country B, then which of the following is most likely to occur?

Firms from country A would move to lower wage country B, while the workers would stay put in their respective countriesWorkers from country B would move to higher wage country A, while the firms would stay put in their respective countries.Policy makers would make sure the wage is equalized in both countries to avoid immigration and outsourcing.Workers from country B would move to higher wage country A, while the firms from country A would move to lower wage country B, resulting in an arbitrage.

10. Which of the following causes contribute to the decline in unionism?

All of theseStructural changes in the labor force and the economy that are unfavorable to the unionsManagerial opposition where in firms may hire consultants, permanent strike breakers, illegally fire pro union workers, etc.Government and firms providing services (such as workers compensation) to its employees that were previously provided by unions

11. Which of the following statements about the wage paid by a monopsonist is true?

It is higher than the wage paid in a competitive labor market.It is determined by labor unions.It is the same as the wage paid in a competitive labor market.It is less than the wage paid in a competitive labor market.

12. Which of the following cases fall under the 'non standard' category of employment? I. Mary is an independent contractor for the Department of Defense. II. Jill is a computer programmer hired directly by Cisco. III. Dave, a graduate student, is a part time researcher at Max Publishing

Only II represents a non standard worker.Both II and III represent non standard workers.Both I and II represent non standard workers.Both I and III represent non standard workers.

13. Consider the graph below. The labor demand curves D and D' show the maximum amount that firms are willing to pay to hire any given number of workers. D shows the original demand for labor. After a payroll tax is introduced by the government, the curve shifts to D'. In this situation, which of the following is true?

The one who bears the burden of the tax is dictated by the government.The employees bear the burden of the tax.Both employers and employees share the burden of the tax.The employers bear the burden of the tax.

14. Fill in the blank. The presence of mobility costs does not let the law of one price prevail in markets, giving the firms some sort of ________________.

Monopsony powerSignal about the ability of the workersBargaining powerMonopoly power

15. Suppose the optimal labor demand function is given by the following equation. L*= p³ / 8r^1/2 w If p = 200, r = 25, and w = 4, calculate the elasticity of demand with respect to wages.

-0.250.251-1.5

16. Fill in the blank. The extra wages offered by firms to compensate workers for undesirable working conditions is termed as __________________.

Compensating wage differentialsEquilibrium wagesBonusesNon pecuniary wages

17. Which of the following is NOT necessarily true about unemployment compensation?

Unemployment benefits lengthens the duration of job searchThe exhaustion of unemployment benefits result in a decrease in the acceptance wageNew labor market entrants and reentrants are just as eligible for receiving unemployment benefits as are unemployed workersUnemployment benefits are provided to workers only as long as they actively seek work, up to a specified number of weeks

18. Which of the following implies complementarities in human capital investments?

Investments in early childhood educationJob trainingPost-secondary financial aidInvestments in secondary schooling

19. There are 100 employees in both firms A and B. Assuming that the probability of death for employees in firm A is greater than that for employees in firm B by .01, firm A compensates its employees by paying them $5000 more annually. What is the value of human life in firm A?

$500,000$5 million$5000$50

20. Assume that an individual's utility level(U) is a function of two goods: real income (Y) and leisure time (L) as in the simple neoclassical model of labor supply and is given by the function: U=3YL^1/3. The marginal utility of leisure is given by which of the following?

YL-2/3YL-1/3YL2/3YL1/3

21. Which of the following best describes the 'offer curve?'

Different combinations of wage-risk offered by different firmsDifferent levels of risk offered by the firm at the existing wageDifferent wage offers made by firms to individuals depending on their education levelDifferent combinations of wage-risk demanded by different individuals

22. If employee discrimination exists in the form of male employees having a distaste for working with women, the wage differential between men and women might do which of the following, and why?

Decrease, because the employer would compensate the women with a premium wage for putting up with the discriminationIncrease, because the men will be willing to work with women only if they get a wage premiumStay the same, because it would be against the law to pay the men and women different wagesIncrease, because employers would hire a sex-segregated work force and each group would be paid differently

23. U^A and U^B are the indifference curves for individuals A and B respectively. From the graph, what can we can infer?

Risk factor of the individuals cannot be interpreted from the graph.Individual B is more risk averse than individual A.Both individuals prefer risky jobs.Individual A is more risk averse than individual B.

24. In order to reduce labor turnover, firms often have internal labor markets use which of the following?

Pay based on productivity levelsJob laddersSevere penalties if the worker leaves the firmThe usual demand and supply forces

25. Choose the best answer to fill in the blanks. If the National Football League is the only employer of professional football players in America, it represents a case of ________________ in the __________________ market.

Monopoly, goodsMonopsony, goodsMonopsony, laborMonopoly, labor

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com