Chap 9 solution - CH 9 SOLUTIONS TO TEXTBOOK PROBLEMS Quick...

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CH 9 SOLUTIONS TO TEXTBOOK PROBLEMS Quick Quizzes 1. The unemployment rate is measured through a survey of about 50,000 households to find out the percentage of the labour force that is unemployed. The unemployment rate overstates the amount of joblessness because some of those who report being unemployed may not, in fact, be trying hard to find a job. But the unemployment rate understates the amount of joblessness because discouraged searchers report being out of the labour force even though they want jobs. 2. An increase in the world price of oil increases the amount of frictional unemployment as oil- producing firms increase output and employment, but other firms, such as those in the auto industry, reduce output and employment. The sectoral shift from the auto industry to oil firms causes higher frictional unemployment for a time until workers have shifted from the auto industry to the oil industry. Although no increase in unemployment is really desirable, this type of frictional unemployment is necessary to reallocate resources between different sectors. Public policies that might affect the unemployment caused by this change in the price of oil include employment agencies, which can help auto workers move into the oil industry, job-training programs to help workers adapt to a new industry, and unemployment insurance, which keeps workers from suffering economic hardship while changing from one industry to ano [Type here]
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[Type here] 3. Figure 1 shows the supply curve ( S ) and the demand curve ( D ) for labour. The wage ( W ) is above the equilibrium wage ( W E ). The result is unemployment, equal to the amount by which labour supply ( L S ) exceeds labour demand ( L D ). Quantity o f Labou r Figure 1 4. A union in the auto industry raises the wages of workers employed by General Motors and Ford by threatening to strike. To prevent the costs of a strike, the firms generally pay higher wages than they would if there was no union. However, the higher wages reduce employment at General Motors and Ford. Wages and employment in other industries are affected, since unemployed autoworkers seek jobs elsewhere, reducing wages and increasing employment. [Type here]
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[Type here] 5. There are four reasons that firms might find it profitable to pay wages above the level that balances the quantity of labour supplied and the quantity of labour demanded: (1) to ensure that workers are in good health so they will be more productive; (2) to reduce worker turnover because it is costly to hire new workers; (3) to make workers eager to keep their jobs, thus discouraging them from shirking; and (4) to attract a better pool of workers. Questions for Review 1. Statistics Canada categorizes each adult (15 years of age and older) as either employed, unemployed, or not in the labour force. The labour force consists of the sum of the employed and the unemployed. The unemployment rate is the percentage of the labour force that is unemployed. The labour-force participation rate is the percentage of the total adult population that is in the labour force.
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