Question

Which of the following statements is (are) correct?
(x) Minimum wage laws that raise the raise the minimum wage above the equilibrium wage in the unskilled labor market contribute to the natural rate of unemployment.
(y) Minimum wages create unemployment in markets where they create a surplus of labor. Unemployment of this type is called structural.
(z) If some wages are forced above the equilibrium level and they are not able to return to equilibrium, then the economy experiences an increase in structural unemployment and an elevation of the natural rate of unemployment.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Which of the following statements about unions is (are) correct?
(x) Right-to-work laws give workers in a unionized firm the right to choose whether or not to join the union. Such laws tend to diminish the bargaining power of unions.
(y) If a union bargains successfully with an employer and increases the wage paid to workers, then this action usually decreases the quantity of labor supplied and increases the quantity of labor demanded.
(z) When a union bargains successfully with an employer, in that industry unemployment increases and wages rise
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

According to the theory of efficiency wages
(x) anything that makes the efficiency wage rise relative to the market-clearing wage will increase the quantity demanded of labor and reduce the quantity supplied of labor.
(y) firms may choose to pay a wage above the equilibrium level to attract the best skilled workers, to provide an incentive to work hard and to reduce worker turnover.
(z) anything that makes the efficiency wage rise relative to the market-clearing wage will cause a surplus of labor at the efficiency wage and increase the amount of structural unemployment.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Which of the following statements is (are) correct?
(x) Thelma, the CEO of a corporation operating in a relatively poor country where wages are low, decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive.
(y) Efficiency wages to address worker health, worker turnover, worker effort, and worker quality contribute to the natural rate of unemployment.
(z) Efficiency wages, minimum-wage laws, and unions all keep wages above the equilibrium level, causing a surplus of labor.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Answer 1

1. Thus, correct option is A.

2. When union bargains successfully,it is successful in raising the wages for the workers. However,at the increased wages the labor demanded by firms would fall while the labor supply would increase because more people would be willing to work at higher wages. Due to this fall in labor demand and rise in labor supply, unemployment would rise. Thus, statement z is correct.

Statement x is also correct because Right to work law makes it optional for workers to join the union and pay union fees. The critics of this law say that it increases cost of maintaining and operating the union and is intended to reduce bargaining power of the unions.

Thus, correct option is C.

3. The correct statements are y and z and the statements are self explanatory.

Thus, correct option is D.

4. All the statements are right. Efficiency wages are paid to make workers more productive/increase their efficiency, reduce worker turnover,etc. Thus, firms are willing to pay higher wages than equilibrium wages for these reasons which leads to higher labor supply. This creates surplus labor which lead to increase in structural and eventually natural rate of unemployment.

Thus, correct option is A.

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