Question

1. An important development during the Great Recession of 2007–2010 was that

   	A.	more than 70 percent of all unemployed workers exited unemployment within 5 weeks; however, most of this movement was due to the unemployed becoming discouraged and exiting the labor force rather than finding a job.
   	B.	the amount of frictional and seasonal unemployment increased dramatically while the amount of structural unemployment decreased substantially.
   	C.	the unemployment rate increased dramatically, but the average unemployment spell remained constant at about 8 weeks of unemployment.
   	D.	most unemployment spells lasted 13 to 26 weeks.
   	E.	more than 35 percent of all unemployed workers remained unemployed for more than 26 months.

2 points   

QUESTION 2

1. For two substitutes in production, if the substitution effect dominates

   	A.	then the inputs are complements.
   	B.	then the inputs are substitutes.
   	C.	then the inputs could be either complements or substitutes.
   	D.	then the inputs can not be used at the same time.

2 points   

QUESTION 3

1. The price elasticity of demand for the final product affects the elasticity of demand for labor by affecting the magnitude of:

   	A.	the substitution effect that occurs in the labor market
   	B.	the scale effect that occurs in the labor market.
   	C.	both the substitution and scale effects.
   	D.	neither the substitution nor the scale effects.

2 points   

QUESTION 4

1. Which of the following is best considered an implicit contract?

   	A.	A union contract that specifies hourly wages and fringe benefits.
   	B.	A historical agreement between a firm and its employees that the firm pays workers based on a combination of age, experience, and education.
   	C.	A union contract that specifies how overtime wages will be calculated.
   	D.	An informal agreement between a firm and its employees to reduce hours of work for everyone a little bit during an economic contraction in order to prevent firing anyone.
   	E.	A firm offering health insurance to all of its workers in order to abide by the Affordable Care Act.

2 points   

QUESTION 5

1. A standard efficiency wage model pays workers higher wages in order to increase worker efficiency. As a result, firm profits increase and there is a pool of involuntarily unemployed workers. In this model, if the firm's cost of monitoring effort falls,

   	A.	the firm will increase its number of factory managers.
   	B.	the number of shirking workers will fall.
   	C.	the efficiency wage will fall.
   	D.	firm profits will fall.
   	E.	the pool of involuntarily unemployed workers will increase.

Answer 1