Economics Answers

Involuntary unemployment can be caused by ... (several answers possible)

(a) a minimum wage.
(b) introduction of higher taxes.
(c) lowering taxes.
(d) employment protection legislation.

Aggregate supply curve ... (several answers possible)
(a) is vertical in the long run because, in the long term, expected prices are equal to the actual ones.
(b) is moved to the right if the potential output rises.
(c) shows a positive relationship between the price level and output in the short run.
(d) is not affected by the expectations formation processes.

Wage stickiness ... (several answers possible)
(a) gives rise to a positively sloped short run AS curve. (b) is caused by long term working contracts.
(c) exists only for real wages.
(d) is an example of the so called ‘nominal stickiness’.

Efficiency wages can hel to reduce unit labor costs when ...(several answers possible)
(a) the labor productivity nonlinearly depends on the wage.
(b) the labor productivity rises faster than the wage increment.
(c) the elasticity of productivity with respect to the wage is larger than unity.
(d) the elasticity of productivity with respect to the wage is positive but less than unity.

The insider-outsider theory of unemployment says that ...(several answers possible)
(a) trade unions do not internalize sufficiently the well-being of the unemployed.
(b) trade unions can be a cause for involuntary unemployment.
(c) trade unions tend to increase wages above the competitive level.
(d) the position of trade unions should be bolstered in order to lower unemployment.

Efficiency wages ... (several answers possible)
(a) are irrelevant for low skilled workers.
(b) are higher than market clearing wage.
(c) do not cause unemployment.
(d) are sometimes paid by employers to reduce shirking or turnover costs.

In the classical labor market model ...
(a) there is no unemployment
(b) there is no voluntary unemployment (c) there is no involuntary unemployment (d) employment is equal to labor supply

The production function Y = AKαLβ with A = 2, α = 0.4 and β = 0.6 exhibits the following
properties:
(a) concavity in L
(b) convexity in L
(c) constant returns to scale in K and L (d) homogeneity of degree 1 (in K and L) (e) increasing returns in K and L

A Company is operating on perfectly competitive markets and wants to maximize its profits. Assume that HSG uses the production function Y = ALα with A = 2 and α = 0.5. The real wage w is 4. What is the optimal value of labor L that should be employed?

A financial analyst tells you that investing in stocks will allow you to double your money in 7 years. What annual rate of return is the analyst assuming you can earn?