Question :
14.3 Explaining the Existence of Unemployment
1) Suppose the wage rate : 1381201
14.3 Explaining the Existence of Unemployment
1) Suppose the wage rate in the labor market is $15 and the demand for labor decreases. If wages are sticky,
A) unemployment decreases.
B) unemployment increases.
C) unemployment stays the same.
D) wages decrease to eliminate the surplus.
2) Suppose the equilibrium wage rate in the labor market is $10 and the demand for labor increases. If wages are sticky, there will be a
A) surplus of labor and the wage rate declines.
B) shortage of labor and the wage rate increases.
C) shortage of labor and the wage rate stays the same.
D) surplus of labor and the wage rate increases.
3) Suppose the wage rate in the labor market is $8 and more people entered the labor force, which of the following statements is CORRECT?
A) If wages are flexible, then wages will increase.
B) If wages are sticky, the unemployment rate increases.
C) If wages are sticky, the unemployment rate stays the same.
D) If wages are flexible, the unemployment rate increases.
4) Suppose the wage rate in the labor market is $15 and the productivity of workers increases, which of the following statements is INCORRECT?
A) The labor demand curve shifts to the right.
B) If wages are flexible, there will be an increase in wages.
C) If wages are sticky, there will be a shortage in the labor market.
D) If wages are sticky, there will be a surplus in the labor market.
5) If wages are sticky, an increase in labor
A) demand decreases the wage rate.
B) supply increases the wage rate.
C) demand increases the wage rate.
D) demand leaves wage rates intact.
6) An unspoken agreement between workers and firms that the firm will not cut wages is known as
A) an implicit or social contract.
B) an explicit contract.
C) a relative-wage contract.
D) employment-at-will.
7) The social contract explanation for the existence of downwardly sticky wages focuses on
A) employment contracts that stipulate workers’ wages, usually for a period of one to three years.
B) the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other industries are receiving similar cuts.
C) unspoken agreements between workers and firms that firms will not cut wages.
D) the incentive that firms have to hold wages above the market clearing rate.
8) Intel Corporation, a major manufacturer of microchips, saw the demand for its product drop by 25%. Even though the demand for its product decreased, Intel did not cut the wages of its nonunionized workers. This is an example of
A) employment-at-will.
B) an implicit or social contract not to cut wages.
C) an explicit contract not to cut wages.
D) a relative-wage contract.
9) Frito Lay experienced a 20% drop in its sales. Even though the demand for its product decreased, Frito Lay did not cut the wages of its nonunionized workers. This is an example of
A) an explicit contract not to cut wages.
B) employment-at-will.
C) poor management.
D) an implicit or social contract not to cut wages.
10) Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the
A) relative-wage explanation of unemployment.
B) explicit contract explanation of unemployment.
C) implicit contract explanation of unemployment.
D) efficiency wage explanation of unemployment.
