04 Jun Question EC450/550: Theory of LaborEconomics
Question
EC450/550: Theory of LaborEconomics
Instructions:Choosetheonealternativethatbestcompletesthestatementoranswersthequestion.
Eachmultiple-choicequestionisworthone(1)point.
1. Allelseequal,whichofthefollowingwouldtendtomakeeducationalinvestmentsmoreattractive?
(a) An increase in the discountrate.
(b) An increase in the wage earned byhigh schoolgraduates.
(c) An increase in the age at which peopleretire.
(d) A decrease in the SATscores of high schoolgraduates.
2. Rate-of-return estimates will bebiased upwardif
(a) thepsychicbenefits associatedwitheducation albenefitsareincludedinthemeasure ofbenefits.
(b) differences in ability are not accountedfor.
(c) firms use educational investments as a wayto screen for high-productivityapplicants.
(d) None of the above.
3. If the unemployment rate of married males is 9% and their labor force participation is 66%, thentheir employment rateis
(a)85%
(b)35%
(c)56%
(d)60%
4. On average, women earn less thanmen.
(a) This is inconsistent with the existence of labour-marketdiscrimination.
(b) This implies that there is labour-marketdiscrimination.
(c) This could be the result of labour-marketdiscrimination.
(d) None of the above.
5. Diminishing marginal returns for labor occurbecause
(a) hiring more employees means that each has less capital with which towork.
(b) it is more difficult to manage a firm as the size of the workforce and capital stock both grow.
(c) hiringmoreemployeesmeansthattheywillsubdivide tasksandtherefore becomemoreefficient.
(d) None of the above.
6. If policy shifts individuals’ budget constraints down bythe same magnitude for all levels ofleisure,wewouldexpect
(a) an income effect that movesthe average individual toward moreleisure.
(b) an income effect that movesthe average individual toward morework.
(c) a substitution effect that movesthe average individual towardmoreleisure.
(d) a substitution effect that movesthe average individual towardmorework.
Instructions:Answers toeachofthefollowingproblems willbeevaluated basedonaccuracy, com- pleteness and clarity. Unsupported answers willreceiveno credit.Any assumptions you make in answeringthequestionsshould beclearlystated.Point allocationisgiven besideeachquestion.
7. (4points) Somepeopleare concernedthatprofessorsnowgive AsandBstostudentswhowouldhavereceivedCsandDsinthepast.Whateffectdoesgradeinflationhaveontheability ofeducationtofunction as an effective signal ofproductivity?
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