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
The Hicks-Marshall laws of derived demand state that labor demand is more elastic when:
Answer: It is easy to substitute other inputs for labor
One of the Hicks-Marshall laws states that labor demand is more elastic when other inputs can easily substitute for labor in the production process.
A perfectly inelastic labor supply curve implies that:
Answer: The quantity of labor supplied does not change regardless of the wage
A perfectly inelastic supply curve is vertical, meaning the quantity of labor offered is fixed no matter how high or low the wage is.
Statistical discrimination in labor markets occurs when:
Answer: Employers use observable group characteristics as proxies for unobservable individual productivity
Statistical discrimination arises when employers use group averages (e.g., gender, race) to infer individual worker attributes they cannot directly observe.
In a bilateral monopoly in the labor market, the wage outcome:
Answer: Is indeterminate and depends on relative bargaining power of the union and the monopsonist
With one seller (union) and one buyer (monopsonist), there is no single equilibrium wage; the outcome lies in a range determined by negotiation strength.
Which of the following best describes 'labor hoarding' during a recession?
Answer: Firms retain more workers than current output requires to avoid rehiring costs when demand recovers
Labor hoarding occurs when firms keep redundant workers during downturns because firing and later rehiring skilled employees is costly.
The added worker effect suggests that during recessions, labor force participation will:
Answer: Increase as secondary workers enter to replace lost household income
The added worker effect occurs when secondary earners (e.g., spouses) enter the labor force to compensate for lost income when the primary earner becomes unemployed.
An increase in the payroll tax paid by employers is most likely to result in:
Answer: Lower wages for workers as employers shift part of the tax burden back
In competitive labor markets, economic incidence shows that workers bear most of a payroll tax through lower wages regardless of which side nominally pays.