Labour Markets: Wages, Wage Differentials, Trade Unions, Labour Mobility, Unemployment Causes

1. Wage rate in a labour market is mainly determined by

A demand for labour only
B supply of labour only
C demand for and supply of labour
D government spending only

2. Demand for labour is usually derived from

A demand for the final good or service workers produce
B workers’ desire for higher wages
C the number of people unemployed only
D the central bank’s money supply only

3. A firm will be more willing to employ workers when

A workers become less productive
B demand for its product increases
C wages rise above productivity
D production becomes less profitable

4. Which is most likely to increase demand for construction workers?

A a fall in house building
B an increase in demand for new houses
C a rise in unemployment benefits
D workers becoming less skilled

5. Which is most likely to reduce demand for labour in a factory?

A demand for the factory’s product rises
B workers become more productive
C machines replace workers
D exports of the product increase

6. Supply of labour means

A workers willing and able to work at different wage rates
B firms willing and able to employ workers at different wages
C government spending on training
D total output produced by workers

7. Which factor is most likely to increase the supply of labour?

A higher retirement age
B lower working-age population
C increased emigration of workers
D fewer childcare facilities

8. Which factor is most likely to reduce the supply of labour?

A immigration of working-age people
B better childcare support
C earlier retirement age
D higher wages in the occupation

9. A rise in wages in an occupation is likely to cause

A extension in supply of labour
B contraction in supply of labour
C decrease in demand for the product
D fall in quantity of labour supplied

10. A fall in wages in an occupation is likely to cause

A extension in supply of labour
B contraction in supply of labour
C increase in supply of labour
D increase in demand for labour

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. Which is the best example of occupational mobility of labour?

A a worker moving from Lahore to Karachi for the same job
B a worker retraining from coal mining to nursing
C a worker refusing to leave family in another city
D a firm moving machinery to another factory

12. Which is the best example of geographical mobility of labour?

A a teacher becoming an accountant
B a worker moving to another region for work
C a worker learning new computer skills
D a firm hiring more workers

13. Occupational immobility is most likely caused by

A lack of required skills
B high transport costs to another city
C strong family ties in one area
D expensive housing in another region

14. Geographical immobility is most likely caused by

A lack of qualifications for a different occupation
B no training for a new job
C high cost of moving house
D low productivity in the current job

15. A coal miner cannot become a software engineer because he lacks programming skills. This is

A geographical immobility
B occupational immobility
C voluntary unemployment
D frictional employment

16. A worker refuses a job in another city because housing there is too expensive. This is

A occupational immobility
B geographical immobility
C structural unemployment only
D seasonal unemployment only

17. Which policy is most likely to increase occupational mobility?

A retraining schemes
B higher house prices
C reduced information about vacancies
D lower transport links

18. Which policy is most likely to increase geographical mobility?

A better housing availability in growing regions
B fewer training programmes
C more occupational licensing restrictions
D lower education spending

19. Wage differentials mean

A all workers receive the same wage
B differences in wages between workers or occupations
C wages always rise with inflation
D firms do not pay wages

20. Which is a likely reason for wage differentials?

A all jobs require identical skills
B some jobs need more training and qualifications
C all workers have equal productivity
D all occupations have the same working conditions

21. Which worker is likely to earn a higher wage due to human capital?

A an untrained worker with no experience
B a highly qualified surgeon
C a worker in an occupation with many applicants and few vacancies
D a worker with low productivity

22. Dangerous jobs may pay higher wages because of

A wage compensation for poor working conditions
B lower demand for workers always
C lower productivity of all workers
D zero opportunity cost

23. A city job pays more than a rural job partly because living costs are higher. This is an example of

A wage differential
B free good
C public good
D price ceiling

24. Which factor may reduce wage differentials?

A discrimination
B differences in education
C trade union bargaining for low-paid workers
D differences in risk and responsibility

25. Which is an example of wage discrimination?

A paying a skilled worker more than an unskilled worker
B paying a productive worker more than a less productive worker
C paying workers differently because of gender despite equal productivity
D paying a manager more because of higher responsibility

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. A trade union mainly represents

A employers only
B workers
C central banks
D consumers only

27. Which is a possible aim of a trade union?

A lower wages for members
B better working conditions
C lower employment protection
D weaker bargaining power

28. Which method may a trade union use to increase wages?

A collective bargaining
B reducing worker skills
C lowering demand for labour
D increasing supply of labour without training

29. Collective bargaining means

A workers negotiate individually with every customer
B trade union negotiates with employers on behalf of workers
C government bans all wage increases
D firms set wages without discussion

30. If a trade union pushes wages above equilibrium, what may happen?

A excess demand for labour
B excess supply of labour
C no unemployment possible
D firms demand more labour automatically

31. Why might trade unions increase unemployment?

A higher wages may reduce quantity of labour demanded
B higher wages always increase labour demand
C firms must employ unlimited workers
D workers stop wanting wages

32. Why might trade unions not increase unemployment?

A firms may accept higher wages if productivity also rises
B higher wages always reduce productivity
C labour demand is always perfectly elastic
D workers become free goods

33. Which trade union action is most likely to increase worker productivity?

A resisting all training
B negotiating better training and safer working conditions
C demanding lower skill levels
D encouraging absenteeism

34. Which is a possible disadvantage of trade unions to employers?

A higher wage costs
B lower bargaining pressure
C guaranteed higher profits
D lower labour costs

35. Which is a possible advantage of trade unions to workers?

A improved pay and working conditions
B lower job security
C reduced safety standards
D lower bargaining power

36. Unemployment occurs when people are

A not working and not wanting a job
B willing and able to work but unable to find employment
C retired and not looking for work
D full-time students only

37. Which is not normally counted as unemployed?

A someone actively looking for work
B someone willing and able to work but without a job
C someone retired and not seeking work
D someone recently made redundant and searching for work

38. Frictional unemployment is caused by

A workers moving between jobs
B long-term decline of an industry due to changing demand
C lack of demand in the whole economy
D changes in weather only

39. Structural unemployment is caused by

A temporary job search between jobs
B mismatch between workers’ skills/location and available jobs
C workers choosing not to work at current wages only
D full employment

40. Cyclical unemployment is caused by

A a fall in total demand in the economy
B harvest seasons only
C workers changing jobs voluntarily
D better education

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. Seasonal unemployment is most likely in

A farming and tourism
B central banking only
C permanent civil service jobs only
D all jobs equally

42. A ski instructor loses work every summer. This is

A seasonal unemployment
B cyclical unemployment
C structural unemployment
D disguised unemployment only

43. Workers lose jobs because consumers switch from coal to renewable energy. This is

A frictional unemployment
B structural unemployment
C seasonal unemployment
D voluntary employment

44. Workers lose jobs because a recession reduces total spending. This is

A cyclical unemployment
B occupational mobility
C seasonal unemployment only
D voluntary unemployment only

45. A worker leaves one job and searches for a better one for two weeks. This is

A frictional unemployment
B structural unemployment
C cyclical unemployment
D hidden employment

46. Which policy is most suitable for structural unemployment?

A retraining workers for growing industries
B reducing all education spending
C increasing barriers to worker mobility
D reducing job vacancy information

47. Which policy is most suitable for cyclical unemployment?

A increasing aggregate demand through fiscal or monetary policy
B banning workers from retraining
C reducing demand further
D encouraging firms to close

48. Which policy may reduce frictional unemployment?

A better job information services
B fewer job advertisements
C lower internet access
D higher barriers to changing jobs

49. Which policy may reduce seasonal unemployment?

A developing off-season employment opportunities
B reducing tourism variety
C closing training centres
D reducing labour mobility

50. Which statement is most accurate?

A all unemployment has the same cause and solution
B different types of unemployment require different policies
C unemployment is impossible in a mixed economy
D higher wages always eliminate unemployment

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. Answer: C

A wrong: demand for labour matters, but wage is not determined by demand only.
B wrong: supply of labour matters, but wage is not determined by supply only.
C correct: wage rate is determined by demand for and supply of labour.
D wrong: government spending may affect labour markets but is not the main direct determinant.

2. Answer: A

A correct: firms demand workers because workers help produce goods/services that consumers demand.
B wrong: workers wanting higher wages affects labour supply, not labour demand.
C wrong: unemployment may affect supply of labour, not derived demand.
D wrong: money supply is not the direct source of labour demand.

3. Answer: B

A wrong: lower productivity makes workers less valuable to firms.
B correct: higher product demand increases derived demand for workers.
C wrong: if wages rise above productivity, firms may employ fewer workers.
D wrong: lower profitability reduces demand for labour.

4. Answer: B

A wrong: less house building reduces demand for construction workers.
B correct: more demand for new houses increases demand for workers needed to build them.
C wrong: unemployment benefits affect labour supply incentives, not construction labour demand directly.
D wrong: less skilled workers may reduce firms’ willingness to employ them.

5. Answer: C

A wrong: higher product demand increases labour demand.
B wrong: more productive workers may increase demand for them.
C correct: machines replacing workers reduces demand for labour.
D wrong: higher exports increase product demand and may increase labour demand.

6. Answer: A

A correct: labour supply is workers willing and able to work at different wage rates.
B wrong: this describes demand for labour by firms.
C wrong: training can affect labour supply quality, but it is not the definition.
D wrong: output produced is productivity/production, not labour supply.

7. Answer: A

A correct: higher retirement age keeps more people in the labour force.
B wrong: lower working-age population reduces labour supply.
C wrong: emigration reduces labour supply.
D wrong: fewer childcare facilities may reduce labour supply, especially for parents.

8. Answer: C

A wrong: immigration increases labour supply.
B wrong: childcare support can increase labour supply.
C correct: earlier retirement reduces the number of workers available.
D wrong: higher wages usually cause extension in labour supply.

9. Answer: A

A correct: higher wages cause movement up along the labour supply curve, an extension.
B wrong: contraction happens when wages fall.
C wrong: product demand is not directly reduced by wages rising.
D wrong: quantity of labour supplied usually rises when wages rise.

10. Answer: B

A wrong: extension happens when wages rise.
B correct: lower wages cause movement down along labour supply, a contraction.
C wrong: increase in supply means the whole supply curve shifts right.
D wrong: wage fall does not automatically increase labour demand.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. Answer: B

A wrong: moving location for the same job is geographical mobility.
B correct: retraining from one occupation to another shows occupational mobility.
C wrong: refusing to move location shows geographical immobility.
D wrong: machinery movement is capital mobility.

12. Answer: B

A wrong: changing occupation is occupational mobility.
B correct: moving to another region for work is geographical mobility.
C wrong: learning skills improves occupational mobility.
D wrong: hiring workers is labour demand.

13. Answer: A

A correct: occupational immobility is mainly caused by lack of skills/qualifications for another job.
B wrong: transport cost affects geographical mobility.
C wrong: family ties affect geographical mobility.
D wrong: expensive housing affects geographical mobility.

14. Answer: C

A wrong: qualifications affect occupational mobility.
B wrong: training affects occupational mobility.
C correct: high moving costs can prevent workers moving location.
D wrong: low productivity affects wages/employability, not mainly geographical mobility.

15. Answer: B

A wrong: geographical immobility means difficulty moving area.
B correct: lack of programming skills prevents movement to another occupation.
C wrong: voluntary unemployment means choosing not to work at the current wage.
D wrong: frictional unemployment is short-term job search.

16. Answer: B

A wrong: occupational immobility is about inability to change job type.
B correct: expensive housing prevents movement to another area.
C wrong: structural unemployment may result, but the specific barrier is geographical immobility.
D wrong: seasonal unemployment is linked to time of year.

17. Answer: A

A correct: retraining helps workers move into different occupations.
B wrong: higher house prices reduce geographical mobility.
C wrong: less vacancy information worsens mobility.
D wrong: poor transport links reduce geographical mobility.

18. Answer: A

A correct: better housing availability helps workers move to where jobs exist.
B wrong: fewer training programmes reduce occupational mobility.
C wrong: licensing restrictions reduce occupational mobility.
D wrong: lower education spending reduces skills.

19. Answer: B

A wrong: this describes equal wages, not differentials.
B correct: wage differentials are differences in wages between workers/jobs.
C wrong: wage differentials do not mean wages always rise.
D wrong: firms do pay wages to workers.

20. Answer: B

A wrong: identical skills would reduce wage differences.
B correct: jobs requiring more training/qualifications often pay more.
C wrong: equal productivity would reduce wage differences.
D wrong: different working conditions can cause wage differences.

21. Answer: B

A wrong: low human capital usually leads to lower wages.
B correct: a surgeon has high human capital from education, training and skill.
C wrong: many applicants and few vacancies usually reduce wages.
D wrong: low productivity usually reduces wages.

22. Answer: A

A correct: dangerous or unpleasant jobs may pay extra compensation.
B wrong: high wages are not because labour demand is always lower.
C wrong: dangerous jobs do not mean all workers are less productive.
D wrong: opportunity cost still exists.

23. Answer: A

A correct: different wages between city and rural jobs are wage differentials.
B wrong: a free good has no opportunity cost.
C wrong: a public good is non-rival and non-excludable.
D wrong: a price ceiling is a maximum price.

24. Answer: C

A wrong: discrimination can increase unfair wage gaps.
B wrong: education differences create wage differentials.
C correct: unions may raise wages of low-paid workers, reducing differentials.
D wrong: different risk/responsibility creates wage differences.

25. Answer: C

A wrong: different skills justify wage differences.
B wrong: different productivity justifies wage differences.
C correct: paying differently because of gender despite equal productivity is discrimination.
D wrong: higher responsibility can justify higher pay.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. Answer: B

A wrong: employers are represented by employer associations.
B correct: trade unions represent workers.
C wrong: central banks manage monetary policy.
D wrong: consumer groups represent consumers.

27. Answer: B

A wrong: unions usually aim for higher wages.
B correct: unions may aim for better pay, safety and working conditions.
C wrong: unions usually want stronger protection.
D wrong: unions aim to strengthen bargaining power.

28. Answer: A

A correct: collective bargaining allows workers to negotiate as a group.
B wrong: lower skills weaken wage claims.
C wrong: lower labour demand reduces wages.
D wrong: higher labour supply can reduce wages unless demand also rises.

29. Answer: B

A wrong: customers are not usually wage negotiators.
B correct: collective bargaining is union negotiation with employers for workers.
C wrong: it is not a government ban.
D wrong: it involves negotiation, not unilateral wage setting.

30. Answer: B

A wrong: high wages reduce quantity demanded and increase quantity supplied, not excess demand.
B correct: wages above equilibrium cause more workers to seek jobs than firms want to hire.
C wrong: unemployment may occur.
D wrong: firms usually demand less labour at higher wages.

31. Answer: A

A correct: higher wages raise labour costs, so firms may reduce employment.
B wrong: higher wages do not always increase labour demand.
C wrong: firms do not have to employ unlimited workers.
D wrong: workers still want wages.

32. Answer: A

A correct: if productivity rises with wages, firms may keep workers because higher wages are matched by higher output.
B wrong: higher wages may improve motivation/productivity.
C wrong: labour demand is not always perfectly elastic.
D wrong: workers are scarce economic resources, not free goods.

33. Answer: B

A wrong: resisting training reduces productivity.
B correct: training and safer conditions can improve worker efficiency.
C wrong: lower skill levels reduce productivity.
D wrong: absenteeism reduces productivity.

34. Answer: A

A correct: unions may negotiate higher wages, increasing employer costs.
B wrong: unions increase bargaining pressure.
C wrong: higher wage costs do not guarantee higher profits.
D wrong: unions usually raise, not lower, labour costs.

35. Answer: A

A correct: unions can improve wages, safety and working conditions.
B wrong: unions usually aim to improve job security.
C wrong: unions usually demand better safety.
D wrong: unions increase workers’ bargaining power.

36. Answer: B

A wrong: people not wanting work are economically inactive, not unemployed.
B correct: unemployed people are willing and able to work but unable to find jobs.
C wrong: retired people not seeking work are not unemployed.
D wrong: full-time students are usually economically inactive unless seeking work.

37. Answer: C

A wrong: active job seekers may be counted as unemployed.
B wrong: willing and able people without jobs are unemployed.
C correct: retired people not seeking work are not counted as unemployed.
D wrong: redundant workers searching for work are unemployed.

38. Answer: A

A correct: frictional unemployment occurs during short-term movement between jobs.
B wrong: long-term industry decline causes structural unemployment.
C wrong: lack of total demand causes cyclical unemployment.
D wrong: weather-related work gaps are seasonal unemployment.

39. Answer: B

A wrong: temporary job search is frictional unemployment.
B correct: structural unemployment is caused by mismatch of skills/location with available jobs.
C wrong: choosing not to work at current wages is voluntary unemployment.
D wrong: full employment means very low unemployment.

40. Answer: A

A correct: cyclical unemployment results from falling aggregate demand during recessions.
B wrong: harvest seasons cause seasonal unemployment.
C wrong: changing jobs causes frictional unemployment.
D wrong: better education may reduce unemployment.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. Answer: A

A correct: farming and tourism often depend on seasons.
B wrong: central banking is not seasonal in the same way.
C wrong: permanent civil service jobs are less seasonal.
D wrong: not all jobs are equally seasonal.

42. Answer: A

A correct: ski work depends on winter season, so summer unemployment is seasonal.
B wrong: cyclical unemployment is caused by recession.
C wrong: structural unemployment is caused by long-term mismatch.
D wrong: disguised unemployment means more workers than needed.

43. Answer: B

A wrong: frictional unemployment is short-term job search.
B correct: coal decline from changing demand creates structural unemployment.
C wrong: this is not due to seasons.
D wrong: voluntary employment is not the concept.

44. Answer: A

A correct: recession lowers aggregate demand and creates cyclical unemployment.
B wrong: occupational mobility is ability to change job type.
C wrong: seasonal unemployment depends on time of year.
D wrong: this is not voluntary.

45. Answer: A

A correct: short-term unemployment while searching for a better job is frictional.
B wrong: structural is long-term mismatch.
C wrong: cyclical is recession-related.
D wrong: hidden employment is not the correct concept.

46. Answer: A

A correct: retraining reduces skill mismatch and helps workers enter growing industries.
B wrong: reducing education worsens skills.
C wrong: barriers to mobility worsen structural unemployment.
D wrong: less vacancy information worsens job matching.

47. Answer: A

A correct: cyclical unemployment is caused by low aggregate demand, so demand-side policy helps.
B wrong: banning retraining worsens employment prospects.
C wrong: reducing demand further increases cyclical unemployment.
D wrong: firm closures worsen unemployment.

48. Answer: A

A correct: better job information reduces search time between jobs.
B wrong: fewer adverts worsen job matching.
C wrong: lower internet access reduces information.
D wrong: barriers to changing jobs increase frictional unemployment.

49. Answer: A

A correct: off-season jobs reduce unemployment outside peak seasons.
B wrong: reducing tourism variety may worsen seasonal unemployment.
C wrong: closing training centres does not help.
D wrong: reducing mobility worsens employment matching.

50. Answer: B

A wrong: unemployment has different causes.
B correct: frictional, structural, cyclical and seasonal unemployment require different policies.
C wrong: unemployment can exist in mixed economies.
D wrong: higher wages may increase unemployment if above equilibrium.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.