Question

1. The method of financing unemployment insurance benefits tends to

   		increase the length of job search.
   		increase frictional unemployment.
   		create an incentive for firms to prefer layoffs to wage cuts.
   		both a and b.

1. Seasonal unemployment can be considered voluntary unemployment because

   		it is caused by wages being inflexible downward.
   		to attract workers to industries with well-known seasonal fluctuations in demand, employers may have to pay workers a compensating differential
   		workers are covered by unemployment insurance.
   		all of these

1. Which of the following is nota problem usually associated with individual incentive-pay schemes?

   		Wide variations in the firm’s profits
   		Erosion of group loyalty
   		Overemphasis on the measurable aspects of job performance
   		Misuse of the equipment

Answer 1

1. The correct answer is both a and b. When unemployment insurance is too generous, it allows people longer duration of time to look for new jobs as they have a source of income even while staying unemployed for that duration of time. On the other hand it creates frictional unemployment. Frictional unemployment is said to occur when a person leaves his job for either searching ajob, or to go for skill training for increasing their income.

2. Correct answer is all of these. Seasonal unemployment may occur for various reasons such as coverage by unemployment insurance, workers remaining unemployed as they ask for higher differential wages, and also because wages are inflexible downward.

3. The correct answer is wide variations in firm's profits. Individual incentive-pay schemes may lead to erosion of group loyalty as better individual performance may lead to excessive competition, as well as overemphasis on the measurable aspects of job performance, and misuse of equipment.