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laborexam2s07 - Labor Exam 2 By writing your PPID below you...

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Labor Exam 2 By writing your PPID below, you are indicating March 28, 2007 your intention to abide by the honor pledge: PPID: This exam consists of ten short questions ( worth four points apiece ) and three long questions ( worth ten points, fifteen points, and ten points ) , for a total of 75 points. You have 50 minutes to answer all completely and clearly in the space provided. Short Questions 1. Explain why wage growth decreases as a worker gets older. 2. If education is used only as a signal of a worker s quality, the market equilibrium might be inefficient. Explain why. 3. Acme Widget Co. hires labor in a perfectly competitive market. Using a graph, explain what happens to its labor demand ( in the short run ) when there is an increase in the price of its output.
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4. The labor demand elasticity is higher in the long run than in the short run. Using one of Marshall s laws of derived demand, explain why this is true. 5. What does the capital - skill complementarity hypothesis state?
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