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Multiple Choice Quiz
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1

The labor force participation rate gives the fraction of the:
A)population that is in the labor force.
B)labor force that is employed.
C)population that is employed.
D)employed that is in the labor force.
2

The unemployment rate is:
A)the fraction of the population that is not working.
B)calculated as the number of unemployed divided by the number of employed plus the number of unemployed.
C)both (A) and (B).
D)neither (A) nor (B).
3

The term hidden unemployment indicates that many workers who are:
A)unemployed are often unwilling to apply for government assistance and are not counted in the calculation of the unemployment rate.
B)working are employed fewer hours than they desire and thus have unemployed hours that are not counted in the calculation of the unemployment rate.
C)unemployed become discouraged and leave the labor force and are not counted in the calculation of the unemployment rate.
D)none of the above.
4

The marginal utility of leisure is:
A)the change in utility for an additional hour of leisure holding consumption constant.
B)the change in leisure as hours worked increases, holding consumption fixed.
C)both (A) and (B).
D)neither (A) nor (B).
5

The marginal rate of substitution
A)diminishes as the quantity of leisure consumed increases.
B)is equal to the absolute value of the slope of the indifference curve.
C)the government is more likely to interfere with a labor market when wages are low than when they are high.
D)is defined by |MUL/MUC |.
E)all of the above.
6

Suppose Larry's wage (W) is $50 an hour, consumption (C) is measured in dollars, non-labor income (V) is $10 a day, and he has 16 hours in the day to work (H) or leisure (L). The slope of the budget constraint is:
A)50
B)40
C)16
D)10
E)5
7

Suppose Larry's wage (W) is $6 an hour, his non-labor income (V) is $15 a day, consumption C is measured in dollars, and he has 18 hours in the day to work (H) or leisure (L). The equation of the budget constraint is:
A)C=123-6L.
B)C=123-6H.
C)C=108-6L.
D)C=108-6H.
E)none of the above.
8

We know that when an individual is maximizing utility:
A)the individual spends all his money.
B)the ratio of the marginal utilities (MUL/MUC) is equal to the wage (W) if the individual works.
C)the ratio of the marginal utilities (MUL/MUC) is greater than the wage (W) if the individual does not work.
D)all of the above.
E)none of the above.
9

If the wage increases from below Larry's reservation wage to above Larry's reservation wage, we know that:
A)Larry will leisure more.
B)Larry will work less.
C)Larry will enter the labor force.
D)Larry will leave the labor force.
E)any of the above could be true.
10

The reservation wage:
A)is equal to MUL/MUC when the individual does not work.
B)is the wage such that a wage increase causes an individual to work more while a wage decrease causes the individual to work less.
C)is the slope of the indifference curve tangent to the budget constraint.
D)indicates the value of work time.
E)all of the above





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