University of Siegen

School of Economic Disciplines

Summer Term 2024 Matriculation No.:

Labor Market Policy Mock Examination Date (July 19, 2024)

Examiner: Prof. Dr. habil. Lars Siemers Page 1 of 5

ˆ Time for examination: 60 minutes

ˆ Permitted writing aids: non-programmable calculator

Instructions:

ˆ The exam consists of 5 pages (including this page) and 2 problems, all of which
must be solved.

ˆ Fill in your matriculation number in the box in the top right corner
of every page of the exam sheet and write it in the top right corner of
every page in the answer booklet. You must hand in your exam sheet
together with the answer booklet.

ˆ Problem 1 (Multiple Choice Questions) has to be solved on the exam sheet.

Problem 2 has to be solved on the answer booklet. Any answer deviating from this
rule will not be graded.

ˆ Do not provide answers on the included draft sheets, as they will not be graded.

ˆ Please annotate graphics and figures completely. Further, explain any variable,
if there is no explanation given in the problem.

ˆ Any non-conclusive or unreadable answers will be considered ’wrong’.

P
Problem 1 2
Max. points 25 35 60
Achieved points

Grade:
 University of Siegen
School of Economic Disciplines

Summer Term 2024 Matriculation No.:

Labor Market Policy Mock Examination Date (July 19, 2024)

Examiner: Prof. Dr. habil. Lars Siemers Page 2 of 5

1 Multiple Choice Questions (25 Points)

Instructions:

ˆ Every question has exactly one correct answer.

ˆ There are no penalty points.

ˆ Circle the answer of your choice.

ˆ If you want to revise your choice, circle the answer that you think is right and cross-
out the previous answer with an ’X’. Such crossed-out options will be considered
as ’not circled’.

ˆ Each correct answer scores 2.5 points.

ˆ Wrong choices, no choice, unclear choices, including the circling of several options,
are evaluated with zero points.

Questions:

1. Consider the basic model of labor demand, how does an increase in the capital
interest rate in the long run affect the firm’s capital and labor demand?
(a) the firm produces less capital intensive and more labor intensive.
(b) no effect on the firm’s capital and labor demand.
(c) the firm produces more capital intensive and less labor intensive.

2. Efficiency wages:
(a) are implemented by the government in order to solve market failures.
(b) are paid voluntarily by firms to improve labor productivity.
(c) are lower than the market clearing wage and thus reduce the employment
level.

3. The profit maximizing choice of labor for a monopolist is determined by the rule:
(a) the marginal product of labor is equal to the real wage.
(b) the marginal product of labor is greater than the real wage.
(c) the marginal product of labor is less than the real wage.
 University of Siegen
School of Economic Disciplines

Summer Term 2024 Matriculation No.:

Labor Market Policy Mock Examination Date (July 19, 2024)

Examiner: Prof. Dr. habil. Lars Siemers Page 3 of 5

4. In the neoclassical model of labor supply, the level of the wage rate w influences:
(a) the position of the budget-line.
(b) the form of the indifference curves.
(c) the slope of the budget-line.

5. The slope of the long run labor demand function is in absolute terms:
(a) lower than the slope of the short run labor demand function.
(b) higher than the slope of the short run labor demand function.
(c) equal to the slope of the short run labor demand function.

6. In the monopoly trade union model, a rising wage elasticity of labor demand has:
(a) a positive effect on the employment level in equilibrium.
(b) a negative effect on the employment level in equilibrium.
(c) an ambiguous effect on the employment level in equilibrium.

7. In a standard neoclassical labor market with perfect competition, excess supply

arises:
(a) if the government sets a minimum wage which equals the market clearing
wage.
(b) if the government sets a minimum wage which is above the market clearing
wage
(c) if the government sets a minimum wage which is below the market clearing
wage.

8. According to the Insider-Outsider-Model, the higher the number of insiders in t-1:

(a) the lower the wage demand.
(b) the wage demand stays the same.
(c) the higher the wage demand.

9. Consider the household decision model of labor supply with two partners discussed
in the lecture. One important result of the model is:
(a) that both partners should concentrate completely on housework or on earning
income on the labor market in any case.
(b) that at least one of the two partners should concentrate completely on hou-
sework or on earning income on the labor market.
(c) that none of the two partners should concentrate completely on housework or
on earning income on the labor market.
 University of Siegen
School of Economic Disciplines

Summer Term 2024 Matriculation No.:

Labor Market Policy Mock Examination Date (July 19, 2024)

Examiner: Prof. Dr. habil. Lars Siemers Page 4 of 5

10. The expansion path depicts:

(a) the optimal relationship between the product price and the production level.
(b) the optimal level of input factor prices.
(c) the optimal ratio of the employed input factors.
 University of Siegen
School of Economic Disciplines

Summer Term 2024 Matriculation No.:

Labor Market Policy Mock Examination Date (July 19, 2024)

Examiner: Prof. Dr. habil. Lars Siemers Page 5 of 5

2 Labor Market Equilibrium (35 Points)

Consider a labor market with the usual labor supply and demand curves.

a) The government imposes a maximum wage below the optimal wage rate. Draw the
expected employment and welfare effects. Indicate how this government policy affects
the workers’ total income and the firms’ rent.

b) Now suppose the government introduces an income tax on the workers. Again draw
a graph that depicts the expected employment and welfare effect and show how the
workers’ total income and firms’ rent is affected.