Question 1

In a competitive labor market, which of the following best describes the relationship between wage rate ($$W) $$and the quantity of labor demanded ($$L^D$$)?

Accepted Answer

There is an inverse relationship; lower wages increase the quantity of labor demanded.

Question 2

Given the labor demand function $$L^D = 100 - 2W$$ and labor supply function $$L^S = 20 + 3W$$, what is the equilibrium wage ($$W_E) in $$the market?

Accepted Answer

$$W_E = 16$$

Question 3

If the equilibrium wage in a labor market is $$W_E = 16$$, what is the equilibrium quantity of labor ($$L_E) $$supplied, given $$L^S = 20 + 3W$$?

Accepted Answer

$$L_E = 68$$

Question 4

Which of the following would most likely cause a rightward shift in the labor demand curve?

Accepted Answer

Technological advancements that complement labor.

Question 5

Suppose a new technology (SBTC) increases the demand for high-skilled labor and decreases the demand for low-skilled labor. What is the expected impact on the wage gap between high-skilled and low-skilled workers?

Accepted Answer

The wage gap will increase.

Question 6

If the labor supply curve shifts rightward due to population growth, what happens to the equilibrium wage ($$W_E) $$and quantity of labor ($$L_E$$)?

Accepted Answer

$$W_E$$ decreases, $$L_E$$ increases.

Question 7

Consider the following scenario: At a wage rate below equilibrium ($$W \u003c W_E$$), what is the likely outcome in the labor market?

Accepted Answer

Quantity demanded will exceed quantity supplied, creating a shortage.

Question 8

Skill-biased technological change (SBTC) is most likely to:

Accepted Answer

Increase demand for high-skilled workers.

Question 9

Which of the following is a plausible effect of Artificial Intelligence (AI) on labor market inequality?

Accepted Answer

AI may increase inequality by raising the gap between AI-exposed and non-AI jobs.

Question 10

The 'Superstar Effect' refers to:

Accepted Answer

A phenomenon where a small number of top performers capture a disproportionate share of rewards.

Question 11

Suppose the supply and demand equations for high-skilled labor are $$W = 10 + 2L$$ and $$W = 50 - 3L. $$What is the equilibrium wage ($$W) $$and quantity ($$L$$)?

Accepted Answer

$$L = 8, W = 26$$

Question 12

After SBTC, the new demand for high-skilled labor is $$W = 60 - 3L$$ and supply remains $$W = 10 + 2L. $$What is the new equilibrium wage?

Accepted Answer

$$W = 30$$

Question 13

Which of the following is NOT a factor that can shift the labor supply curve to the left?

Accepted Answer

Technological advancements complementing labor.

Question 14

If a labor market experiences a surplus due to a wage rate above equilibrium, what is the expected market response?

Accepted Answer

Downward pressure on wages.

Question 15

The Gini coefficient in the US increased from 0.35 to 0.47 between 1980 and 2023. What does this indicate?

Accepted Answer

Income inequality has increased.

Question 16

Which of the following policies is most likely to reduce income inequality while adapting to technological change?

Accepted Answer

Implementing progressive income and wealth taxes.

Question 17

In the context of labor market equilibrium, what does the intersection of the labor demand and supply curves represent?

Accepted Answer

The equilibrium wage and quantity of labor.

Question 18

Which of the following is a routine task most susceptible to automation?

Accepted Answer

Procedural, rule-based activities.

Question 19

Most of the recent rise in US income inequality is explained by:

Accepted Answer

Across-firm wage dispersion.

Question 20

Which of the following is NOT a likely social or economic impact of rising income inequality?

Accepted Answer

Universal increase in wages for all workers.

Economics of Inequality: Labor Market Theory and Technological Change

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