ECS2604_semester1_ass_solutions

Assignments 1 - First Semester 2020 1.11 Which of the following is NOT an assumption of a perfectly competitive labour market? [1] Workers have full information on jobs available and wage rates. [2] Employers have incomplete information on wage rates paid by other employers. [3] Workers and employers are entirely rational. [4] Neither workers nor enterprises exercise any influence over the market wage. [5] Workers are perfectly mobile. 1.12 Which of the following is NOT a unique characteristic of the labour market? [1] Employers only purchase the services of the workers by means of a contractual relationship. [2] Workers are not standardised, since they are different in terms of skills, personality, etc. [3] Employers act rationally in the sense that their goal is the maximisation of profit. [4] The worker's personality characteristics change over time. [5] The worker's remuneration is affected by personal taxation and his or her standard of living, but is unaffected by inflation. 1.13 Which of the following statements is/are NOT true ? a. The labour force is influenced by the proportion of the population that wants to work as well as the size of the population as determined inter alia by fertility and mortality rates and net migration. b. Labour supply is a matter of quantity and quality. c. The size of the population has no bearing on the size of the labour force. d. Real wage differentials between South Africa and a destination country have no influence on the emigration figures of our country. [1] a b c [2] a c [3] Only b [4] c d [5] Not [1], [2], [3] or [4] 1.14 The labour force participation rate refers to [1] the skills, knowledge and other acquired characteristics of workers that make them more productive. [2] an organisational unit where the pricing and allocation of labour are governed by a set of administrative rules rather than by market forces. [3] the inferior treatment of some workers with respect to employment, promotion and wages. [4] the percentage of the population of working age that furnishes its labour for the production of economic goods and services, whether employed or not. [5] the potential labour force only. 1.15 Which of the following statements are true ? a. An indifference curve shows the preferences of an individual to various combinations of income and leisure time. b. Points A and C indicate different levels of satisfaction or utility for the specific individual. c. If I1 applies, the individual is in equilibrium at either point A or point B. d. The indifference curve is convex to the origin, meaning that as the individual moves from point A to point B on curve I1, he/she becomes increasingly reluctant to give up income to enjoy more leisure. e. A workaholic's indifference curve is relatively inelastic, while a leisure lover's indifference curve is relatively elastic. [1] a b d [2] b d e [3] a b [4] b c d [5] c e 1.16 Use the information in the following table to calculate the labour force participation rate (LFPR) of a hypothetical country in 2016. Round off the answer to 2 decimal places. Full population (all ages) 4 000 000 Working-age population 3 000 000 Labour force 2 000 000 [1] LFPR = 50,00% [2] LFPR = 66,67% [3] LFPR = 75,00% [4] LFPR = 80,00% [5] LFPR = 100,00% 1.17 Assume that as the wage rate rises, a worker's substitution effect is smaller than the income effect. We can conclude that the worker's [1] labour supply curve will have the usual upward slope. [2] labour supply curve will be backward bending. [3] labour supply curve will be completely inelastic. [4] labour supply curve will be horizontal. [5] labour supply curve will be vertical. 1.18 Which of the following statements are true about the demand for labour? a. The long-run demand curve for labour is more inelastic than the short-run demand curve for labour. b. The firm's short-run demand for labour is indicated by the downward sloping VMP curve. c. An isoquant indicates the various combinations of labour and capital that can be used to produce different levels of production. d. Isoquants that lie further from the origin of a graph indicate higher levels of production (output). e. A firm's profit will be maximised where an isocost curve intersects an isoquant. [1] a b d [2] b d [3] c d e [4] b d e [5] a c e 1.19 Use the information in the following table to calculate the labour absorption capacity of a hypothetical country between 2015 and 2016. Year Labour force Number of employed in formal sector 400 000 900 000 [1] Labour absorption capacity = 5% [2] Labour absorption capacity = 40% [3] Labour absorption capacity = 50% [4] Labour absorption capacity = 100% [5] Labour absorption capacity = 200%