Sample Quiz #6Ec 202 Fall, 2009Michigan State University L. Martin1. When labor supply increases, which of the following does not occur?a. a fall in the real wage;b. a fall in average labor productivity;c. a rise in GDP;d. an increase in employment;e. all of the above occur.*2. In the long run which of the following occur following an increase in investment in physical capital?a. an increase in the real wage;b. an increase in GDP;c. an increase in the number of employed workers;d. a rightward shift in the demand for labor;e. all of the above occur.*3. In the long run the real wage equalsa. the demand for labor;b. GDP divided by the labor force;c. the average productivity of workers;d. output per person;e. the marginal product of labor.*4. In recent decades the distribution of growth rates across countries hasa. shifted up;b. shifted down;c. shifted to the left;*d. shifted to the right;e. remained unchanged.5. In recent decades worldwide poverty hasa. increased because many countries have seen output per person fall;b. increased because inequality has increased so much;c. decreased because some relatively poorer countries (such as China and India) have grown rapidly;*d. decreased because almost all countries have grown significantly;e. remained unchanged because, according to Malthusian theory, humans populate themselves down to the level of subsistence.For questions 6 and 7 use the following data.2009 data 2010 dataReal GDP = $14 trillion $15 trillionLabor force = 150 million 150 millionUnemployment rate = 10 % 10%Population = 300 million 300 million7. The employment to population ratio in 2009 isa. .415;*b. .5;c. .09;d. .05;e. .10.8. At the current growth rate, how long until GDP doubles?a. 10 years;b. 25 years;c. 33 years;d. 70 years;e. 98 years.*1. Consider the following production function. Labor supply equals 5Labor Output Average MarginalProduct Product0 01 502 903 1204 1405 1506 1507 140a. Complete the table.b. How much is output per worker? _____30_____ c. How much is the real wage? ______10____ d. Draw a diagram of the production function and labor market and show the equilibrium?e. On your diagram show the effect of an increase in labor supply.Sample Quiz # 5Ec 202 Fall, 2009Michigan State University L. Martin1. In the labor market, an increase in productivity shiftsa. demand to the right increasing employment and the real wage;*b. demand to the left decreasing employment and the real wage;c. demand to the left increasing employment but reducing the real wage;d. demand to the right decreasing employment but increasing the real wage;e. supply to the left.2. In the market for low skilled labor an increase in the minimum wage creates aa. shortage of labor;b. shortage of labor if the minimum wage is above the market clearing wage;c. shortage of labor if the minimum wage is below the market clearing wage;d. surplus of labor;e. surplus of labor if the minimum wage is above the market clearing wage. *3. In the period from the early 1970s to the early 1990s in the United States real wagesa. declined;b. grew slowly as inequality was reduced;c. grew slowly as inequality was increased;*d. grew rapidly as inequality was reduced;e. grew rapidly as inequality was increased.4. Frictional unemployment includes a. those temporarily out of work due to the short term problem of matching workers and jobs;*b. those out of work due to a longer term mismatch between the skills of workers and the skills demanded for available jobs.c. those out of work due to the lower demand for workers that occurs during recessions;d. those out of work because they have withdrawn from the labor force;e. all of the above.5. If the labor force is 100 million and 75 million people are employed, then the unemployment rate isa. 25%;*b. 33%;c. 20%;d. 75%;e. 14%.6. According to efficiency wage theory, the real wagea. adjusts efficiently to equate supply and demand in the labor market;b. eliminates unemployment and thus promotes the efficient use of labor;c. is set by searching workers and is equal to the minimum acceptable real wage;d. exceeds the market clearing wage;*e. is less than the market clearing wage.7. . According to search theory unemployment is productive in the sense thata. workers put forth more effort, fearing the spell of unemployment that follows ajob loss;b. unemployed workers search and over time find jobs in which they will be moreproductive;*c. better workers find jobs sooner;d. capitalism demands a reserve army of unemployed workers ready to take newly created jobs.e. none of the above.1. Consider the following production function.Labor Output Marginal Product0 01,000 700,000 700,000/1,000 = 7002,000 1,200,000 5003,000 1,500,000 3004,000 1,600,000 1005,000 1,600,000 06,000 1,500,000 -100a. Find the marginal product of labor and enter in the table.b. Suppose that labor supply equals 3,000. What will be the equilibrium real wage?_______300________ c. What will be the economy’s potential GDP? (That is, how much output can the economy produce?)______1,500,000_________ 2. Suppose that the labor force equals 100 million, the job finding rate is .18 and the job loss rate is .02.a. What is the equilibrium unemployment rate? __10%______b. How many people are unemployed in equilibrium? _10 million__ c. How many are employed? __90