Economics and Management 416
Labor Economics
Test 2

You will be asked to write answers to three questions similar to those that follow.  Your audience had exposure to principles of economics, but not labor economics.  Your objective is to thorough with being verbose.  Outlining your answers prior to writing your exam will most likely be beneficial to you.  Each question will be graded on accuracy, completeness,, and clarity.  Each question will have the same weight.  The exam point total will be 200 points.

1.       Outline the arguments for and against increasing the minimum wage.  Use economic theory and graphs illustrate points when possible and appropriate.

2.       Is the statement true or false and discuss your rationale: “an increase in the minimum wage obviously raises employer’s costs and therefore must lower the level of employment”?

3.       Critically evaluate the following claim:  “It’s hard to do it because you gotta look people in the eye and tell’em they’re irresponsible and lazy.  And who’s gonna wanna do that?  Because that’s what poverty is. Ladies and gentlemen.  In this country, you can succeed if you get educated and work hard. Period. Period.  --  Bill O”Reilly

4.       What are the main trade-offs that policy makers face in designing and implementing policies intended to help the poor?  Be sure to provide the fundamental differences between TANF and the EITC in your discussion.

5.       What can be done to discourage inappropriate workers from applying for a job?

6.       If workers are screened by universities, can a firm earn a profit from screening potential candidates?  Under what circumstances is screening more likely to take place on the job rather than before workers enter the labor market?

7.       What performance rewards would you use to motivate creativity in a research and development staff?  What other policies, from our class or others, might you use to reinforce those incentives?

8.       Based on cost-benefit analysis of worker effort, a salaried employee does not have the incentive to give effort.  However, many workers receive a salary and give effort.  Evaluate why this is true and suggest ways a manager could increase the effort of a salaried worker.

The exam is question 3, 4, 5, 8    Hand the test in on Monday!