Question 1

Which of the following best explains why structural unemployment exists in an economy?

Accepted Answer

Because the number of jobs available in some labour markets is insufficient to provide a job for everyone who wants one.

Question 2

Suppose the government increases the minimum wage above the equilibrium wage in a competitive labour market. What is the most likely outcome?

Accepted Answer

A surplus of labour, resulting in unemployment.

Question 3

If the minimum wage is set above the equilibrium wage, which group is most likely to be affected by unemployment?

Accepted Answer

Workers with low skill and little experience, especially teenagers.

Question 4

In a competitive labour market, an increase in the minimum wage results in a(n) $$\underline{\phantom{a}} in $$the quantity of labour supplied and a(n) $$\underline{\phantom{a}} in $$the quantity of labour demanded.

Accepted Answer

increase; decrease

Question 5

Which of the following best describes the role of unions in wage determination?

Accepted Answer

Unions bargain with employers to set wages, often above the equilibrium wage.

Question 6

What is collective bargaining?

Accepted Answer

The process by which unions and firms agree on the terms of employment.

Question 7

Which of the following is a likely criticism of unions from an economic perspective?

Accepted Answer

Unions act as a cartel, causing inefficiency and inequality by reducing employment in unionized firms below the efficient, competitive level.

Question 8

Which of the following is NOT a reason why a firm might pay efficiency wages?

Accepted Answer

To decrease worker effort.

Question 9

Suppose a firm pays an efficiency wage above the market equilibrium. What is a likely consequence?

Accepted Answer

The firm will experience a surplus of labour, leading to higher unemployment.

Question 10

Which of the following statements about union membership in Canada is correct?

Accepted Answer

Union membership is higher in the public sector than in the private sector.

Question 11

A 10% increase in the minimum wage in Canada is estimated to reduce teen employment by what percentage?

Accepted Answer

1-5%

Question 12

Which of the following is an argument made by advocates of unions?

Accepted Answer

Unions can lead to a happier and more productive workforce.

Question 13

If a firm pays a wage higher than workers could receive elsewhere, what is a likely effect according to the efficiency wage theory?

Accepted Answer

Worker turnover will decrease.

Question 14

Which of the following best describes the effect of unions on non-unionized workers?

Accepted Answer

The supply of workers in non-union firms will increase, pushing wages down in those firms.

Question 15

Which of the following is a direct result of a binding minimum wage set above the equilibrium wage?

Accepted Answer

A surplus of labour.

Question 16

Which of the following is NOT a characteristic of structural unemployment?

Accepted Answer

It results from the time it takes for workers to search for jobs that best suit their skills.

Question 17

Which of the following is a likely benefit for a firm that pays efficiency wages?

Accepted Answer

Reduced worker turnover.

Question 18

If a union negotiates a wage above the equilibrium wage, what happens to the quantity of labour demanded and supplied?

Accepted Answer

Quantity of labour demanded decreases, quantity supplied increases.

Question 19

Which of the following is a possible negative effect of unions according to critics?

Accepted Answer

Unions can create conflict between insiders and outsiders in the labour market.

Question 20

A firm that faces high hiring and training costs is most likely to pay efficiency wages for which reason?

Accepted Answer

To reduce worker turnover.

Unemployment and Its Natural Rate (Part 2): Causes and Implications

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