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AnswerKey2 - m 1.1-: 5"" La 11"...

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Unformatted text preview: m 1.1-: 5"" La 11" its 1 Ila [9 1:. ll . [L‘l t3 0 Economics 27 Professor Patricia M. Anderson EXAM 2 May 10, 2006 There are two parts to this exam. Part I is made up of 13 multiple choice problems, and is worth 52 points. Part II is made up of 8 short answer problems, and is worth 48 points. There are 7 total pages. Be sure to read each question carefully before answering. Do not use any books or notes. You have 65 minutes to complete the full 100 point exam. Be sure to budget your time. Good Luck! NAME: PART I - MULTIPLE CHOICE PROBLEMS Read each of the fillowing questions carefully and circle the letter of the one best answer. There are 13 questions in this section, each of which is worth 4points. 1. Holding all else constant, which of the following would tend to make investing in a college education more attractive? / x a An increase in the discount rate, r € 0ka 7 a An increase in the age at which people retire c) An increase in the wage earned by high school graduates (1) Both a) and b). {-92} 2. Consider this Oaxaca decomposition: WI — V72 = [1310? — 12)] +[(a1 — .:12)+(bl — 192))?2 ], where the as and bs are estimated intercepts and slopes. Which of the following statements is true? a) The first term in brackets is the part of the wage gap that is typically considered to be due to discrimination against group 2 X ' b) The first term in brackets may be overstated if we exclude X’s that are different on average for group 1 and group 2. K‘“ @he as and bs are estimated by running separate wage regressions for group 1 and for group true (1) The second term in brackets may be understated if we exclude X ’s that are different on average for group and group 2. 3. Due to the rise in couples who both have high-powered careers: a) we are more likely to see a man become a tied migrant / b) we are more likely to see a man refuse a move that gives him positive net present value ’ 0) individual incentives and family incentives may diverge n «a dim Q) all of the above 4. General training is usually paid for by , and specific training is paid for by a) both the employee and the employer; the employer only. b) the employee only; the employer only. @ the employee only; both the employee and the employer. (1) both the employee and the employer; both the employee and the employer. 5. In “Labor Market Competition and Individual Preferences Over Immigration Policy,” Kenneth F. Scheve and Matthew J. Slaughte conclude that a) all American workers are equally upset by immigration unskilled American workers are more upset by immigration than are skilled American workers c) skilled American workers are more upset by immigration than are unskilled American workers (1) all Americans workers are eqully happy with immigration (i.e. no one is upset by immigration) ' 6. For education to serve as an efficient signal: a) education must increase productivity. b) productivity and educational costs must be positively related. c productivity and educational costs must be unrelated. Q13 higher wages should reflect higher inherent productivity 7. If a worker does not have good information and thinks that risks are lower than they actually are, then OSHAregulations that increase safety standards in the workplace: a) will definitely decrease utility for this worker. b) will definitely increase utility for this worker. Q could either increase or decrease utility for this worker. cannot effect utility for this worker. 8. If in a standard hedonic model of compensating differentials, firm A's isoprofit curves are flatter than those of firm B a) then firm A will be willing to pay a larger compensating differential than firm B. Q then firm B will be willing to pay a larger cempensating' differential than firm A. c then both firms will pay the same compensating differential, but firm Awill have higher profits than firm (1) then risk is more costly to reduce in firm A than in firm B. 9. Which of the following would NOT be an indication that a potential employee has a low ' count rate? The potential employee is less interested in a chance for advancement than a relatively high starting salary. b) The potential employee has a college degree or higher. c) The potential employee is willing to accept a low-paying job with a good pension plan. (1) The potential employee is, willing to undergo large amounts of training. 10. A risk-averse worker will expect utility from a job with possible layoffs than from one with no layoffs, when the two jobs have the same number of expected hours of work and the same hourly wage. a) more less I _ c at least as much - . 9 d) the same amount of 11. In a taste model of discrimination, if customers have a taste for discrimination: a) the existence of competitive market forces will cause discrimination to diminish and eventually disappear (since firms will sacrifice profits by discriminating) @members of the group _for which customers have a taste for discrimination will be worth less to firms 0) segregated workplaces are predicted; d) all of the above 12. For workers who emigrate to the United States from a country with a less equal distribution of earnings, @the largest potential gain exists for unskilled workers. k, b) the largest potential gain exists for skilled workers. 0) immigrants will be positively selected with respect to skills. d) immigrants will, on average, have a higher skill level than the workers who do not emigrate. 13. If a firm offers specific training to its workers, when the training is over, a) workers will most likely be paid a wage that is equal to their current marginal product. b) workers will most likely be paid a wage that is greater than their current marginal product, to compensate for the training. @mrkers will most likely be paid a wage that is less than their current marginal product. ) workers will most likely be paid a wage that is less than their wage before training. PART II - SHORT ANSWER QUESTIONS .Read each of the following questions carefully and answer each in the space provided. Diagrams should be clearly labeled, and explanations should be clear and concise. There are 8 " questions in this section, each of which is worth 6 points. Questions 1 and 2 refer to employment on a small tropical island, where demand in several industries is dependent upon the tourist trade (which varies with the weather and the islande political situation). The graph below reflects how this individual’s utility varies with their number of paid weeks of work. 1. Suppose if an islander works in a tourist-dependent industry, there is a 50% chance of being fully employed for 50 weeks of the year, and a 50% chance of being fully employed for only 20 weeks of the year. What is this individual’s expected utility from this job? Is this individual risk averse? Briefly explain your answers. Empirical utility” .sms r ‘3: as = (00 lea Risk mu, SIHQ WM hours :15 Mum Va W m 50m QM ilIIIIIII L V IIIII V. IIIIIIIilIIIII - - - - - - - - - m 'A 7‘ Annual Paid Weeks of Work 2. Suppose that jobs outside the tourist-dependent industries promise filll employment for exactly 35 weeks of the year. What is this individual’s expected utility from this job? If all individuals have preferences like this one, which job (if any) will be expected to provide a compensating differential to be able to attract workers? Briefly explain your answer. I‘d/35 R SUH/ ’19 b-‘l-LL/g: 51 2% (.0on}; Wl- L; ’Io 0.le was \0 3% tumor lot! We W M impart» as me WM £0 Questions 3 and 4 refer to a market in which blacks are discriminated against, and use the demand curve shown below. You should assume that the supply of workers is perfectly inelastic. SW" IIIIIIIHI I” I" IIIIIIIII IIIIII IIIIII IIIIIII IIIIIIIII IIIIIIIIII IIIIIIIIII IflIIIIIIII 0 20 30 40 50 6D 70 80 90 100 110 12 Black Workers (1000's) 0 3. Suppose the graph above represents a Southern labor market. Briefly describe how the demand curve shown is consistent with employers having a taste for discrimination against blacks. Assuming there are 70,000 black workers, and based on the discrimination reflected in the above graph, what is the equilibrium wage of black workers (relative to white workers)? Dow-me Slam p—Jl a might-1: J A almme dbl” ‘w=-MRP-ol 4. Suppose in a Northern labor market, the equilibrium black/white wage ratio is .9. Use the graph above to illustrate how this different outcome might be due either to a difference in the supply of blacks in the Northern market (but with the same taste for discrimination as the South), or to a difference in the taste for discrimination among Northern employers (but with the same supply of blacks as the South). Briefly explain your answers. WIN"! 50pm? biacks/ aw rm. 71min it 5M: Vii? We ‘ 5M 7M {Shaina "Mi (M’s 6:- 0"ch (“M Wing; - r 1" " w 7 his) Questions 5 and 6 are based on the following information: There are 3 types of inherent productivity: high (H), low (L) and medium (M). Everyone is one of these 3 types, and education does not add to productivity. The costs of obtaining education for each type are shown on the graph below. Year! affiliation 5. Suppose that firms are willing to pay $4 for HS dropouts, and $8 for HS graduates (i.e. 12 years of education). Which type(s) of worker, if any, will choose to graduate from HS? Briefly explain your reasoning. Won should assume that if an individual is indifferent about dropping out or graduating, the individual will drop out.) ‘cosha'fi’ 495% wt 0 a ’L/ why“: vi - a, in, »- ~ . -. w ’ . . (M113 2 ’6 ‘7 I‘i’ “’3' 0‘7 MJA 3,}! SM 6. Suppose instead that firms are willing to pay $6 to L—type workers, and $14 for non-L-type workers. That is, an M and an H are equally good — they just want to separate out the L’s. What is the lowest level of education that can serve as an efficient signal of being a non-L-type? Briefly explain your reasoning. (You should assume that if an individual is indifferent about Obtaining the signal or not, the individual will not obtain the signal.) Questions 7 and 8 use the figure below, which gives the zero profit curves for three firms. Particulates per M1 7. Suppose that there are three different wages paid in this market: $8, $12 and $16. Add and label (as workers 1 through 3) indifference curves for three utility-maximizing workers. What level of particulates is each worker being exposed to? What assumptions must hold for us to be certain that this is, in fact, perfect sorting? Vial-Ir! P2: PwMSw/H 8. Suppose that the town these firms are located in passes a living-wage ordinance mandating a _ minimum $10 wage. Analyze the effect of this mandate on each worker’s wellabeing. Be sure to add to the diagram any curves necessary for the discussion. .‘ Cw} Fab-9” "3 hi 'i PM; 417 “4,1,. firm/4v Ce m '10 M What MW”; Mm t ,7 ;, W Sm o,’ ...
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This note was uploaded on 04/30/2008 for the course ECON 27 taught by Professor Anderson during the Spring '08 term at Dartmouth.

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AnswerKey2 - m 1.1-: 5"" La 11"...

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