Question

7. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a

a.	shortage of labor and a shortage of jobs.
b.	shortage of labor and a surplus of jobs.
c.	surplus of labor and a shortage of jobs.
d.	surplus of labor and a surplus of jobs.

8. The introduction of a union into an industry

a.	raises wages and employment in that industry.
b.	lowers wages and employment in that industry.
c.	lowers wages and raises employment in that industry.
d.	raises wages and lowers employment in that industry.

9. Efficiency wages

a.	create a shortage of labor, and so reduce unemployment.
b.	create a shortage of labor, and so raise unemployment.
c.	create a surplus of labor, and so reduce unemployment.
d.	create a surplus of labor, and so raise unemployment.

10. An increase in the minimum wage

a.	reduces structural unemployment.
b.	reduces frictional unemployment,
c.	increases structural unemployment.
d.	increases frictional unemployment.

Answer 1

7. Option C

Explanation: At the higher wage, the labor supply becomes higher than the equilibrium supply and the labor demand becomes lower than the equilibrium demand. So, there is a surplus of workers and a shortage of jobs.

8. Option D

Explanation: Unions bargain to have a higher wage for the existing workers, which raises the costs of hiring and firms to hire fewer workers.

9. D

Explanation: Efficiency wage is the higher wage than the equilibrium wage. It increases labor supply and since no. of jobs are fixed, it increases unemployment.

10. C

Explanation: In structural unemployment, people do not have the skills for the available jobs. Increase in minimum wage forces firms to cut many low skill jobs and these unemployed workers do not have high skills for high-level jobs. So, structural unemployment increases.

answered by: anonymous