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]