1. When examining cross-national data on labour force participation rates, which of the following phenomena are apparent?

• That men in higher income countries have much higher rates than men in lower-income countries
• That higher income countries tend to have lower rates
• That higher income countries tend to have higher rates than do lower-income countries
• That these rates for women tend to be higher than they are for men
• That women in higher income countries have much higher rates than women in lower-income countries

2. Which of the following statements most closely applies to the labour force participation decision?

Multiple Choice

• It occurs when one accepts an employment position and is working.
• It consists of the choice to allocate a portion of one's time to labour market activities as opposed to non-market activities.
• It includes paid and unpaid work.
• It occurs when one is actively seeking work.
• It doesn't include unemployed workers.

3. The portion of the population that is surveyed as potential labour force participants consists of:

Multiple Choice

• the entire civilian population that is 15 years of age or older.
• the entire population of Canada.
• the civilian non-institutional population.
• Individuals who do hold jobs
• the unemployed plus the employed population.

4. Our income-leisure model suggests that if a worker is moonlighting, then:

Multiple Choice

• She is underemployed.
• she receives an overtime premium.
• There is no income effect
• She is unemployed.
• She is overemployed.

5. Over the backward bending portion of the labour supply curve,

Multiple Choice

• The substitution effect of a wage change dominates the income effect.
• The wage elasticity of labour supply is negative.
• Leisure becomes an inferior good.
• The wage elasticity of labour demand is inelastic.
• There is no longer a trade-off between income and leisure.

6. Which of the following statements concerning the elasticity of labour supply is true?

Multiple Choice

• Overall workers tend to be highly responsive to wage changes
• The income elasticity of supply tends to be positive and of low magnitude
• None of these above statements are true
• The compensated elasticity of supply is close to zero
• The total wage elasticity of supply tends to be positive and of low magnitude.

7. In the basic income-leisure model, what is indicated by a parallel shift of the budget line?

Multiple Choice

• The substitution effect
• A change in the preferences
• The reservation wage
• The total effect of a price change
• The income effect of either a price change or an income change

8. A major and recurring theme of this textbook is the role of empirical research in labour economics. Conceptual models exist to analyze many labour market phenomena, but often the predictions that emerge are ambiguous. It is the objective of empirical research to test the validity of these predictions, and to try to sort out the multiple effects, which may work simultaneously. Such is the case for the theory of individual labour supply. Discuss the major conceptual implications of this model as well as the results from the empirical literature with correspond to them. The key is to link the predictions, which flow from the model, to the hypotheses that have been examined in the literature. In particular, your response can follow the following outline: Without getting bogged down in technical details (i.e., don't give a graph), explain intuitively the role of preferences and constraints in determining the optimal choice of hours worked. What is the impact on the choice of hours worked by an individual if the level of non-market income changes? Briefly describe the income effect and the substitution effect of a wage change, and relate this to the backward bending supply curve. A large number of econometric studies have estimated the shape of the labour supply curve, the sign of the wage elasticity of labour supply, and the income elasticity of labour supply. What have they found, generally speaking, regarding the slope of the supply curve? Does the slope differ between men and women? Figure 2.3 in the textbook shows what appears to be a slight negative empirical relationship across countries between per capita national income and male labour force participation rates, coupled with a slight positive empirical relationship across countries between per capita national income and female labour force participation rates. It might be possible to interpret these observed empirical patterns in terms of substitution effects and income effects.

9.Which of the following statements is false?

Multiple Choice

• Discouraged workers are part of the hidden unemployment phenomenon
• Discouraged workers are considered to be marginally attached to the labour force
• In periods of low unemployment, discouraged workers tend to re-enter the labour force.
• In periods of high unemployment, discouraged workers tend to withdraw from the labour force.
• Discouraged workers behave in a similar fashion as added workers.

10. Which of the following statements regarding the added worker effect is true?

Multiple Choice

• It tends to boost labour force participation when unemployment is low
• It tends to boost labour force participation when unemployment is high
• It tends to reduce labour force participation when unemployment is high
• It resembles moonlighting
• It works in a similar way as the discouraged worker effect

11. Suppose a worker is observed to be working but is forced to work fewer hours than she really wants to work. Which of the following statements is true?

Multiple Choice

• The indifference curve that she is on is tangent to the budget line.
• She is on an indifference curve which is higher than the one which is tangent to her budget line.
• She is on an indifference curve which is lower than the one which is tangent to her budget line.
• She is not on an indifference curve.
• She is on an indifference curve which is lower than the one which passes through the point on the budget line corresponding to zero hours of work.

12. Consider the situation of a worker who is 'at the corner equilibrium' i.e., he or she is supplying zero hours of work and consuming 16 hours of leisure. In context of the income-leisure framework, which of the following statements is false?

Multiple Choice

• The marginal rate of substitution between income and leisure is greater than the wage rate in absolute value terms.
• The indifference curve is steeper than the budget line.
• Marginally, the worker values an hour of leisure more than she values an hour's worth of income.
• The indifference curve is flatter than the budget line.

13. For a worker who is deciding how many hours of labour to supply, all of the following are true except that:

Multiple Choice

• The slope of the budget line equals the slope of the indifference curve.
• The income effect of a wage change equals the substitution effect.
• The marginal rate of substitution between income and leisure is equal to the wage rate.
• The worker cannot increase total utility by working more or fewer hours.
• The rate at which she is willing to exchange leisure for income equals the rate at which the market allows her to do it.

14. Which of the following statements regarding indifference curves is true?

Multiple Choice

• If an individual has a lower valuation of leisure, then the slope of his indifference curve is steeper.
• If an individual has a higher valuation of consumption, then the slope of his indifference curve is flatter.
• If an individual has a lower valuation of leisure, then the marginal rate of substitution of consumption over leisure is higher.
• If an individual has a higher valuation of consumption, then the marginal rate of substitution of consumption over leisure is higher.
• None of these above