Question

38. When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be the equilibrium wage.

    A. about one-quarter of B. much less than
    C. almost equal to
    D. about one-half of

    E. much greater than

39. All of the following do not cause of structural unemployment, except: A. sectoral shift.

    B. efficiency wages.
    C. mismatch of skills
    D. employment-insurance.
    E. workers moving from one job to another

40. Workers unemployed as a result of wage rigidity are:
    A. actively searching for a job to match their skills.
    B. not eligible to receive employment-insurance benefits.
    C. waiting for a job to become available.
    D. relocating to another part of the country as a result of sectoral shifts. E. actively seeking retirement.

41. Employment insurance increases the amount of frictional unemployment by: A. softening the economic hardship of unemployment.
    B. making workers more frantic in their search for new jobs.
    C. inducing workers to accept the first job offer that they receive.

    D. making employers more reluctant to lay off workers.
    E. making retired workers more willing to reenter the labour market.

42. Economists call the changes in the composition of demand among industries and regions: A. insider-outsider conflicts.

    B. sectoral shifts.
    C. moral hazard.
    D. adverse selection. E. efficiency wages.

Answer 1

1. Option E Much greater than.
Insiders leverage their position of power to negotiate a wage that is much higher than the market-clearing wage rate.

2. Option C Mismatch Skills.Structural unemployment is caused by a mismatch of skills between the unemployed and available jobs.

3. Option C waiting for job to become available.Wage rigidity implies that the wages fail to adjust until demand for labour becomes equal to the supply to labour. Wage Rigidity arises because sometimes the wages are not flexible and the real wages are fixed above the equilibrium level. This results in unemployment.Such unemployed wait for job to become available.

4. Option A softening the economic hardship of unemployment.Frictional unemployment is sometimes called search unemployment and can be based on the circumstances of the individual. It is time spent between jobs when a worker is searching for a job or transferring from one job to another. Unemployment people get Unemployment insurance and they get slow in finding the right job.

5.Option B Sectoral Shifts.Such a shift results in structural change that leads to a reallocation of labour across industries, which generates frictional unemployment as labour moves from declining to growing sectors