ECON 115 - Labor Economics Drake University, Spring 2012 William M. Boal Course page: www.drake.edu/cbpa/econ/boal/115 Blackboard: bb.drake.edu william.boal@drake.edu

EXAM 2 ANSWER KEY

### Version A

I. Multiple choice

(1)a. (2)a. (3)c. (4)b. (5)b. (6)b. (7)b. (8)c. (9)b. (10)a.
(11)b. (12)c. (13)c. (14)a. (15)b.

II. Problems

(1) [Payroll tax: 14 pts]

1. 80 million.
2. \$15.
3. 12.
4. \$85 million.
5. \$170 million.
6. \$240 million.
7. \$15 million.

(2) [Cobweb model: 12 pts]

1. initial: E=4000, w=\$40.
2. boom: w=\$100.
3. bust: E=10,000, w=\$70.
4. boom: E=7000, w=\$85.
5. bust: E=8500, w=\$77.50.
6. long-run: E=8000, w=\$80.

(3) [Monopsony: 6 pts]

1. E=1200.
2. w=\$7.
3. E=1400.

(4) [Immigration surplus: 8 pts]

1. w=\$13.
2. w=\$10.
3. Immigration surplus=\$45 million.
4. Transfer=\$450 million.

(5) [Compensating differential: 4 pts]

1. \$21.
2. \$6.

(6) [Value of a statistical life: 5 pts] \$5 million.

(7) [Education in the labor market: 5 pts] 9 percentage points.

(8) [Simple model of schooling decision: 10 pts]

1. \$544,783.
2. \$551,304.
3. choose college.
4. 20 percent.
5. choose no college.

(9) [Job market signaling: 5 pts] \$25,000 < wH < \$32,000.

### Version B

I. Multiple choice

(1)b. (2)b. (3)d. (4)c. (5)a. (6)c. (7)e. (8)b. (9)c. (10)b.
(11)a. (12)c. (13)a. (14)c. (15)c.

II. Problems

(1) [Payroll tax: 14 pts]

1. 70 million.
2. \$16.
3. 10.
4. \$160 million.
5. \$320 million.
6. \$420 million.
7. \$60 million.

(2) [Cobweb model: 12 pts]

1. initial: E=4000, w=\$40.
2. boom: w=\$70.
3. bust: E=7000, w=\$55.
4. boom: E=5500, w=\$62.50.
5. bust: E=6250, w=\$58.75.
6. long-run: E=6000, w=\$60.

(3) [Monopsony: 6 pts]

1. E=1800.
2. w=\$10.
3. E=2200.

(4) [Immigration surplus: 8 pts]

1. w=\$15.
2. w=\$13.
3. Immigration surplus=\$20 million.
4. Transfer=\$300 million.

(5) [Compensating differential: 4 pts]

1. \$24.
2. \$9.

(6) [Value of a statistical life: 5 pts] \$7.5 million.

(7) [Education in the labor market: 5 pts] 11 percentage points.

(8) [Simple model of schooling decision: 10 pts]

1. \$567,391.
2. \$558,696.
3. choose nocollege.
4. 10 percent.
5. choose college.

(9) [Job market signaling: 5 pts] \$30,000 < wH < \$35,000.

[end of answer key]