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Labor Mock 2012

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6 views6 pages

Labor Mock 2012

Uploaded by

Daudi Ngosa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT

HRM 200- LABOUR ECONOMICS

MID-SEMESTER EXAMINATION

3RD APRIL 2012

09:00- 12:00 HOURS

Time allowed: 3 HOURS plus 5minutes reading time

Instructions to Candidates:

1. Check that you have the correct examination in front of you.

2. Answer ALL questions in SECTION A and answer FOUR (4) questions in SECTION B. QUESTION
ONE (1) in SECTION B is COMPULSORY.

3. Fully explain your answers, a graph is not enough. 1 mark will be awarded for neatness and
clarity of presentation

4. All questions must be answered on the answer sheet only.

5. Write down the number of questions that you have answered on the cover of the examination
answer booklet.

6. Begin each question on a new page.

7. No other books, files or mechanical / electronic aids are permitted.

8. There shall be no form of communication between students during the examination. Any
students caught doing this will be disqualified.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.


SECTION A

1. The word isoquant means:


a. Equal wages
b. Equal quantity
c. You cannot argue about tastes
d. All other things remaining equal
2. When analyzing persons, economists consider their primary objective to be:
a. Utility maximization
b. Wallowing in self pity
c. Profit maximization
d. Possession maximisation
3. A relatively “flat” isoquant between dollars and time spent in household production
implies:
a. A relatively large substitution effect of a wage increase
b. No substitution effect of a wage increase
c. A relatively small substitution effect of a wage increase
d. No income effect of a wage increase
4. As wives wages rise relative to husbands, what would we expect to happen to labour
supply choices within the house hold?
a. Both husband and wife would take on a greater number of leisure hours each
week.
b. Women would take on relatively more market work and husbands would take on
relatively more household work.
c. Husbands would take on relatively more market work and retain the same relative
amount of household work.
d. Women would take on more relatively more household and market work.
5. During a recession, what happens to the expected wage rate of those without jobs?
a. It never rises high enough to encourage anyone to look for work.
b. It increases relative to their value in household work.
c. It remains the same
d. It falls sharply
6. On average when does a workers’ market productivity reach its apex?
a. In the early 30’s
b. In middle age
c. Between 16 and 18 years of age
d. The year before retirement.
7. The four “laws” of derived demand were developed by;
a. Hicks and Marshall
b. Leontief and Galbraith
c. Keynes and Smith
d. Cobb and Douglas
8. The labor scale effect refers to the percentage change in employment associated with a
given percentage change in wages holding -------------------- constant.
a. Capital
b. Output prices
c. Labor
d. Entrepreneurial ability
9. When the absolute wage elasticity of labour demand is 0.5, then an eight percent increase
in the wage bill will:
a. Decrease employment by 16 percent
b. Increase employment by 16 percent
c. Decrease employment by 4 percent
d. Increase employment by 4 percent
10. Which of the following is not an example of market failure
a. Price distortions
b. Perfect information
c. Non existence of markets
d. Ignorance
SECTION B

QUESTION ONE COMPULSORY


The production function for a firm given by the equation: where K
stands for units of capital, Q stands for total output, L stands for labour.

Suppose the firm has a fixed capital stock of 10 units:


a) Write down the firms production function (5 marks)
b) find the marginal product of labour (5 marks)
Assume the firm takes prices as given in both input and output markets, selling its
product at a price of $2, and hiring labor at the going wage rate of $10.
c) Find the marginal revenue product (MRPL) (5 marks)
d) Find the equilibrium employment level the firm should consider hiring (5 marks)

QUESTION TWO

1 The basic model of labor demand under competitive labor market conditions predicts that
the minimum wage will produce both winners and losers. The winners are those who
retain their jobs at the higher wage. The losers include those covered by the law who lose
their jobs, and those not covered by the law who experience lower wages because of the
rightward supply shift that accompanies the migration of these unemployed workers to
the uncovered sector.
With the aid of a well labeled diagram, explain the employment effects of a raise in the
minimum wage law in;
a. The covered sector (5 marks)
b. The uncovered sector (5 marks)

2 What factors lead two inputs to be gross substitutes or gross complements? explain (10
marks)
QUESTION 3

Given that individuals have some discretion over the supply of labor, what kinds of factors affect
the choices they make? (7.5 marks)

1. Draw a graph describing the tradeoff between Household production and work for a
single person i.e. Sally. Show where her optimal choice is. (7.5 marks)
Show what happens to her optimal choice when she has a baby? (5 marks)

QUESTION 4
2. The table below shows the number of cakes that could be baked daily at local bakery,
depending on number of bakers.
Number of Bakers Number of cakes
0 0
1 10
2 18
3 23
4 27
a. Calculate the marginal product of labour.
b. Do you observe the law of diminishing marginal returns? Explain
c. Suppose each cake sells for $10. Calculate the marginal revenue product of labour.
d. If each baker is paid $80 per day, how many bakers will the bakery owner hire, given that
the goal is to maximize profits? How many cakes will be baked and sold each day?
QUESTION 5

Consider a firm operating on its long run demand curve with a production function given
by . Where output produced, capital, labour.
a. Graphically depict its optimal combinations of capital and labour that minimizes costs.
(7 marks)
b. What will happen to the firms demand for labour given that the price of capital has
increased. (6.5 marks)
c. What will happen to the firms demand for capital if the price of labour increases.
(6.5 marks)

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