Labour Economics History of Economic Thought General Economics
SET 7-B
Labour Economics
1. A perfectly competitive labour market is a market:
A. with no frictions or costs related to job search B. where workers and firms are perfectly informed about wages and vacancies offered by other firms C. with costs related to job search D. answers A and B are correct E. answers B and C are correct
2. In a certain country there are 50 million people, in that 30 million are employed, 5 million are unemployed and 15 million are inactive. What is the employment rate?
A. 35% B. 50% C. 60% D. 70% E. it is not possible to calculate it based on data above
3. In the monopsony:
A. the fewer employees the monopsony wants to hire, the more the salary increases B. the number of employees in the monopsony has no impact on wages C. there are few people on the market who want to work D. the more employees the monopsony wants to hire, the more the salary increases E. real salaries are fixed (do not change)
4. In a competitive labour market a minimum wage set above the market clearing level:
A. tends to reduce unemployment and increase the market wage B. tends to reduce employment and decrease the market wage C. tends to reduce employment and increase the market wage D. tends to increase employment and decrease the market wage E. has no effect on employment or market wage
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5. Under collective bargaining of the right-to-manage type:
A. wages will be higher the stronger the bargaining power of employers, and the stronger the responsiveness of labour demand and of profits to wages B. employment will be higher than without collective bargaining C. wages will be higher the higher GDP per capita D. employment will be higher the higher GDP per capita E. wages will be higher the stronger the bargaining power of trade unions, and the lower the responsiveness of labour demand and of profits to wages
6. Why is unemployment insurance not provided by private insurance companies?
A. because of moral hazard and adverse selection B. because of lack of demand for such an insurance C. due to a prohibition on advertising for such a product D. because such an insurance would compete with sickness insurance E. nobody knows, why
7. What part of the sentence is missing: „People working in the shadow economy … registered as unemployed.”?
A. are never B. could be C. always are D. do not know if they can be E. none answer is correct
8. Dominating income effect means that when wages increase:
A. labour supply decreases (assuming that leisure is a normal good) B. labour supply increases (assuming that leisure is a normal good) C. labour demand increases D. labour demand decreases E. labour demand is equal to labour supply
9. Persons neither working nor looking for a job are:
A. employed B. unemployed C. entrepreneurs D. inactive E. poor
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10. Active labour market policies (ALMP) do not include:
A. trainings B. programmes supporting the employment of graduates C. subsidized employment D. employment services E. all the above are included in ALMP
11. The insider-outsider model explains involuntary unemployment by:
A. higher bargaining power of employees than unemployed persons, due to the labour turnover costs B. the willingness of employers to pay too much to their employees C. business cycle D. too high minimum wage E. unemployment benefits
12. „Homogenous workforce”:
A. means that no women are included B. adapts to demand shocks C. is a workforce with majority of older workers D. consists of unemployed persons and workers with the same characteristics and productivity E. consists of persons differing in productivity
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History of Economic Thought
13. It is assumed that the classical period in economics covers the years:
A. 1939-1945 B. 1960-2008 C. 1776-1890 D. 1500-1700 E. the whole period before Christ
14. Who presented his own ideas on capital and interest theory, arguing, among others, that present goods are, as a rule, worth more than future goods of a like kind and number?
A. Adam Smith B. Thomas Malthus C. David Ricardo D. John Stuart Mill E. Eugen von Böhm-Bawerk
15. John R. Commons is classified as:
A. classical economist B. neoclassical economist C. orthodox economist D. heterodox economist E. Austrian School economist
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General Economics
16. Below is information on the price elasticity of demand for five goods. For which of them will the percentage drop in demand be greatest when the price increases by 10%?
A. –1.44 B. –0.78 C. –1.26 D. –0.18 E. –1
17. The introduction of the price ceiling (the maximum price) below the market equilibrium price leads to:
A. excess supply B. a decrease in demand C. an increase in output D. excess demand E. an increase in the price paid by consumers
18. Consumer’s nominal income is 4000 PLN per month. The consumer purchases 12 cinema tickets (market price 200 PLN) and 24 pizzas (market price 50 PLN) per month. Which of the following statements is true?
A. the consumer saves 200 PLN per month B. the consumer cannot increase utility from consumption C. the current consumption bundle is on the consumer’s budget line D. the number of tickets purchased can be increased without reducing the consumption of pizzas E. the consumer’s consumption expenditures are equal to his nominal income
19. If the indifference curves have a typical convex shape, then the substitution effect of a price change:
A. causes an increase in consumption of a good whose price has raised B. causes a decrease in consumption of a good whose price has fallen C. causes an increase in consumption of a good whose price has fallen D. does not change consumption of a good whose price has raised E. does not change consumption of a good whose price has fallen
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20. The income elasticity of demand for good X is 0.5 and the income elasticity of demand for good Y is 2.5. The income expansion path for a consumer who has the option of buying only these two goods is (in a coordinate system where the quantity of X is plotted on the horizontal axis and the quantity of Y on the vertical axis):
A. downward-sloping B. horizontal C. vertical D. upward-sloping E. horizontal at the beginning, and then downward-sloping
21. In the current period, the consumer works and earns 50000 $. In the future period, the consumer will retire and his retirement benefits will be equal to 30000 $. In the current period, the market interest rate at which the consumer can take a loan equals 25%. The maximum level of consumer’s total spending in the current period is (in $):
A. 80000 B. more than 80000 C. less than 50000 D. 50000 E. less than 80000
22. The following statements refer to marginal revenue of a monopoly (which does not price discriminate). Which one is correct?
A. marginal revenue is the same for each level of output B. for each level of output, marginal revenue is equal to price C. for each level of output, marginal revenue is equal to marginal cost D. marginal revenue increases with output E. for each level of output, marginal revenue is lower than price
23. For the firm’s current level of output, marginal cost is equal to the average total cost. It means that:
A. the firm is in economic optimum (profit maximization / loss minimization) B. average variable cost is minimized C. the firm makes economic loss D. average total cost is minimized E. total cost is minimized
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24. For the current level of output of the perfectly competitive firm, price is equal to marginal cost and average total cost. Which statement is correct?
A. the firm is not in economic optimum B. the firm makes economic loss C. the firm makes only normal profit D. the firm can further reduce average total cost E. the firm makes both normal and supernormal (economic) profit
25. For the current level of output of the monopoly, marginal revenue, long-run average total cost and long-run marginal cost are equal to 20 $. What long-run decision should be made by the firm?
A. to exit the industry B. to continue producing the current level of output C. to increase output and to decrease price D. to decrease output and to increase price E. only to increase price
26. Which of the following is not an oligopoly model?
A. the Tiebout model B. the Cournot model C. the Stackelberg model D. the Bertrand model E. the kinked demand curve model
27. Which statement about Nash equilibrium is correct?
A. if players do not have a dominant strategy, there is no Nash equilibrium B. there can be maximum one Nash equilibrium in a game C. in Nash equilibrium, players do not want to change unilaterally their strategies D. in the prisoner’s dilemma game, there is no Nash equilibrium E. each Nash equilibrium is Pareto optimal
28. For the firm that is a monopsony in the labor market and a monopoly in the output market, the condition for the optimal level of employment is (MCL – marginal cost of labor; MRPL – marginal revenue product of labor):
A. MCL + MRPL = 1 B. MCL = MRPL C. MCL = MRPL = 0 D. MCL + MRPL = 0 E. MCL < MRPL < 0
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29. Which of the following shifts of the curves leads to a decrease in the wage rate in the industry labor market?
A. an increase in labor demand B. a decrease in labor supply C. an increase in labor demand, accompanied by a weak decrease in labor supply D. an increase in labor demand, accompanied by a strong decrease in labor supply E. a decrease in labor demand
30. Which goods are the source of market failures?
A. inferior goods B. normal goods C. luxury goods D. public goods E. goods with elastic demand
31. Net national product at basic (factor) prices is equal to 500. Indirect taxes are 50 and depreciation is 60. How much is net national product at market prices?
A. 390 B. 450 C. 550 D. 560 E. 610
32. Nominal GDP amounted to 200 billion EUR in 2017 and 220 billion EUR in 2018. In 2018, consumer price index was the same as GDP deflator and equaled 106 (previous year = 100). As the result, in 2018:
A. deflation was recorded B. real GDP decreased C. both inflation and economic recession appeared D. economic growth took place E. real GDP did not change
33. Consider a closed economy without government that behaves according to the Keynesian model. The savings function (S) is the following: S = –50+ 0.25Y (Y – income). What is the marginal propensity to consume?
A. 0.25% B. 5% C. 25% D. 50% E. 75%
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34. In a certain economy, real output has increased. What is its immediate effect in the money market?
A. money supply will increase B. the market interest rate will decrease C. the money supply curve will shift D. money demand will increase E. the amount of money in the economy will increase
35. Which statement is correct according to the IS-LM model?
A. expansionary fiscal policy leads to a decrease in interest rate B. restrictive monetary policy does not influence the level of real output C. an increase in the amount of money in the economy does not lead to higher real output D. an increase in the budget deficit leads to a decrease in firms’ investments E. an increase in the budget deficit leads to economic recession
36. In the AD-AS model, a simultaneous increase in output and a decrease in the price level (a decrease in inflation) may occur in the case of:
A. a beneficial (positive) temporary supply shock B. an adverse (negative) temporary supply shock C. an adverse (negative) permanent supply shock D. an adverse (negative) demand shock E. a beneficial (positive) demand shock
37. Which central bank’s policy leads to higher investments?
A. a decrease in money supply B. an increase in the commercial banks’ required reserve ratio C. an increase in the discount rate D. an increase in the monetary base through open market operations E. the sale of securities by the central bank to commercial banks
38. What are the effects of restrictive fiscal policy in the classical model?
A. an increase in actual output B. an increase in potential output C. an increase in prices (an increase in inflation) D. a decrease in prices (a decrease in inflation) E. a decrease in unemployment
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39. Consumer price index (CPI) informs about:
A. unemployment rate B. the rate of economic growth C. the level of public debt D. inflation rate E. foreign trade balance
40. The central bank wants to lower the inflation rate. Which central bank’s action is appropriate to achieve this goal?
A. to increase the amount of money in the economy B. to buy securities from commercial banks C. to depreciate the domestic currency D. to urge the government to increase budget deficit E. to decrease the volume of loans granted by banks
41. In 2017, budget deficit amounted to 40 billion EUR. It means that:
A. tax revenues were greater than government purchases of goods and services B. costs of servicing public debt were greater than tax revenues C. net tax revenues were greater than government purchases of goods and services D. the sum of tax revenues and revenues from issuing government bonds was greater than budget expenditures E. public debt increased
42. In the economy functioning in line with the assumptions of the demand-side (Keynesian) model, firms’ investment expenditures increased by 100 billion USD in 2017 and decreased by 100 billion USD in 2018. Marginal propensity to consume in 2017 was higher than in 2018. How did real output change in 2018 compared to 2016?
A. increased B. decreased C. cannot be determined because we do not know the value of the marginal propensity to consume in 2017 and 2018 D. did not change E. cannot be determined because we do not know the investment multiplier in 2017 and 2018
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43. Which of the following statements does not fit the description of the economy functioning in accordance with the assumptions of the supply-side (classical) model?
A. the volume of real output depends on the volume of aggregate demand B. expansionary fiscal policy leads to inflation C. monetary policy is ineffective in influencing the level of real output D. there is only voluntary unemployment E. prices in product markets are flexible
44. The part of output growth not explained by the growth of measured inputs is known as:
A. marginal product of labor B. diseconomies of scale C. economies of scope D. the model of economic growth E. the Solow residual
45. If Polish citizens want to buy more goods from abroad, in the foreign exchange (forex) market of the Polish zloty (PLN) we should expect (there is a floating exchange rate system in Poland):
A. a depreciation of the Polish zloty B. an appreciation of the Polish zloty C. a devaluation of the Polish zloty D. a revaluation of the Polish zloty E. a denomination of the Polish zloty
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