Econ 252 Purdue Exam 2 Test
Questions with Guaranteed Pass
Solutions 2025 Update.
Potential Workers - Answer Civilian non institutional population- everyone except children
under 16, active military, institutionalized persons
Employed - Answer Have a paid full time or part time job
Unemployed - Answer No job, but are available for work and have looked for a job in the past
4 weeks
Labor Force - Answer Unemployed +employed
Not in labor force - Answer Persons without paid job and not actively searching for one
Labor Force Participation Rate (LFPR) - Answer 100%*(LF/PW)
Employment Population Ratio (EPR) - Answer 100%*(employed/PW)
Employment Rate (ER) - Answer 100%*(Employed/LF)
Unemployment Rate (UR) - Answer 100%*(unemployment/LF)
counterfactual - Answer calculating unemployment rate with the same labor force as a year
before
labor market - Answer where the equilibrium real wage and quantity of labor are determined
demand for labor - Answer determined by firms that want to maximize profits
supply of labor - Answer determined by workers who want to maximize utility
, Price Taking firms - Answer perfectly competitive firm cannot influence prices of outputs or
inputs
Marginal Benefit - Answer value of the output produced by the last unit of labor
Marginal product of labor - Answer increase in revenue resulting from hiring an additional
worker
marginal cost - Answer the cost to the firm of an additional unit of labor (market wage, w)
VMPl = - Answer w = P*MPl = change in total revenue/change in Labor
Labor Demand Curve - Answer depicts the relationship between the quantity of labor
demanded and the wage, it is the VMPl
Labor demand curve shifts when there is a change in: - Answer 1. output price of the good or
service
2. demand for the good or service
3. Tech progress and high productivity
4. Input prices of capital and land
culture hypothesis - Answer societal values are responsible for differences in prosperity
return-to-entrepreneurship curve - Answer shows the number of entrepreneurs with at least a
particular level of returns
Frictional Unemployment - Answer job seekers who have coordination problems being
matched to the job openings, workers must undertake time consuming job search, arises
because workers and firms have imperfect information about each other
Structural unemployement - Answer wage is stuck above the market-clearing rate, there is
wage rigidity, results from a persistent gap between the quantity of labor supplied and the
quantity of labor demanded
Questions with Guaranteed Pass
Solutions 2025 Update.
Potential Workers - Answer Civilian non institutional population- everyone except children
under 16, active military, institutionalized persons
Employed - Answer Have a paid full time or part time job
Unemployed - Answer No job, but are available for work and have looked for a job in the past
4 weeks
Labor Force - Answer Unemployed +employed
Not in labor force - Answer Persons without paid job and not actively searching for one
Labor Force Participation Rate (LFPR) - Answer 100%*(LF/PW)
Employment Population Ratio (EPR) - Answer 100%*(employed/PW)
Employment Rate (ER) - Answer 100%*(Employed/LF)
Unemployment Rate (UR) - Answer 100%*(unemployment/LF)
counterfactual - Answer calculating unemployment rate with the same labor force as a year
before
labor market - Answer where the equilibrium real wage and quantity of labor are determined
demand for labor - Answer determined by firms that want to maximize profits
supply of labor - Answer determined by workers who want to maximize utility
, Price Taking firms - Answer perfectly competitive firm cannot influence prices of outputs or
inputs
Marginal Benefit - Answer value of the output produced by the last unit of labor
Marginal product of labor - Answer increase in revenue resulting from hiring an additional
worker
marginal cost - Answer the cost to the firm of an additional unit of labor (market wage, w)
VMPl = - Answer w = P*MPl = change in total revenue/change in Labor
Labor Demand Curve - Answer depicts the relationship between the quantity of labor
demanded and the wage, it is the VMPl
Labor demand curve shifts when there is a change in: - Answer 1. output price of the good or
service
2. demand for the good or service
3. Tech progress and high productivity
4. Input prices of capital and land
culture hypothesis - Answer societal values are responsible for differences in prosperity
return-to-entrepreneurship curve - Answer shows the number of entrepreneurs with at least a
particular level of returns
Frictional Unemployment - Answer job seekers who have coordination problems being
matched to the job openings, workers must undertake time consuming job search, arises
because workers and firms have imperfect information about each other
Structural unemployement - Answer wage is stuck above the market-clearing rate, there is
wage rigidity, results from a persistent gap between the quantity of labor supplied and the
quantity of labor demanded
