Labor Economics Flashcards
7 cards from real CBE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Labor Economics flashcards as text
Human capital theory predicts that workers who invest in additional education will:
Answer: Earn higher wages reflecting increased productivity
Human capital investments like education raise worker productivity, leading to higher lifetime earnings that compensate for training costs.
The crowding hypothesis in labor economics argues that occupational segregation by gender causes:
Answer: Lower wages in occupations where women are concentrated due to excess supply
Crowding women into a narrow set of occupations increases labor supply in those fields, depressing wages below competitive levels.
Which of the following is an example of a negative externality that might justify minimum wage legislation?
Answer: Workers receiving wages below subsistence require public assistance, imposing costs on taxpayers
When employers pay wages insufficient for subsistence, workers rely on public transfers, shifting costs to taxpayers — an externality argument for minimum wages.
Structural unemployment arises primarily from:
Answer: A mismatch between workers' skills and available job requirements
Structural unemployment reflects a persistent mismatch between the skills workers have and the skills employers need, often due to technological change.
Under a monopsony in the labor market, the equilibrium wage compared to a competitive market wage is:
Answer: Lower, because the monopsonist restricts hiring below the competitive level
A monopsonist maximizes profit by hiring where MRP = MCL, which is below the competitive quantity, resulting in a wage below competitive levels.
The backward-bending labor supply curve occurs when:
Answer: The income effect of a wage increase dominates the substitution effect, reducing hours worked
At high wage levels, workers are wealthy enough that the income effect (preferring leisure) outweighs the substitution effect (working more), bending supply backward.
Specific human capital, unlike general human capital, is training that:
Answer: Raises a worker's productivity only at the current employer
Specific human capital has value only at the firm that provided the training, giving both the worker and the firm an incentive to share training costs.