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c. income maximization.
d. either a or b.
8 Ehrenberg/Smith • Modern Labor Economics: Theory and Public Policy, Thirteenth Edition Chapter 1 Introduction 8
Normative Economics
10. Normative economic statements
a. must be based on the principle of mutually beneficial gain.
b. are based on ethical principles or goals.
c. relate to voluntary transactions only.
d. both b and c.
13. Policies that move two parties from one Pareto efficient outcome to another
a. will make one of the parties worse off.
b. are often influenced by the parties’ initial endowment of resources.
c. can be designed scientifically outside of the political system.
d. both a and b.
9 Ehrenberg/Smith • Modern Labor Economics: Theory and Public Policy, Thirteenth Edition Chapter 1 Introduction 9
17. One can be reasonably confident a relationship between an independent and a dependent variable
has been found if
a. the standard error of the estimated parameter is small.
b. the standard error of the estimated parameter is less than half the value of the estimated
parameter.
c. the error term of the least squares regression is random.
d. the t-statistic for the estimated parameter is about 0.5.
In answering Questions 18 through 20, please refer to the following information.
Suppose that for a sample of 10,000 individuals, the relationship between annual hours supplied (H),
the hourly wage rate in dollars (W ), and the level of nonlabor income in dollars (V ) (e.g., interest
income, gifts, public assistance) was estimated by multiple regression to be
Hi = 1200 + 0.5Wi − 0.04Vi.
(225) (0.2) (0.01)
The subscript i refers to the ith household where i = 1 to 10,000. Standard errors of the estimated
parameters are in parentheses.
18. The coefficient of −0.04 associated with the independent variable V means that
a. on average, when a person’s wage and nonlabor income both increase by $1, he wishes to work
0.04 hours less.
b. on average, when a person’s nonlabor income increases by $1, he wishes to work 0.04 hours
less, holding all else constant.
c. the true value of the parameter associated with the V variable is equal to zero.
d. both b and c.
10 Ehrenberg/Smith • Modern Labor Economics: Theory and Public Policy, Thirteenth Edition Chapter 1 Introduction 10
19. Comparing the size of the coefficient on the W variable and its standard error, one can conclude that
a. the relationship between H and W has been estimated with reasonable precision.
b. statistically, one can be confident that the true relationship between H and W is not zero.
c. from an economic standpoint, the relationship between H and W is insensitive to changes in W.
d. all of the above.
20. Suppose W and V are positively correlated (e.g., people with high wages save more and thus earn
more interest income). What would happen if V were omitted from the multiple regression?
a. The coefficient on W would become smaller.
b. The coefficient on W would become larger.
c. The standard error associated with the coefficient on W would become smaller.
d. Both b and c.
• Problems
Labor Economics: Some Basic Concepts
21. The concept of a model is one of the most important concepts in economics. Helping the reader to
understand and apply labor market models is the primary purpose of this book. Figure 1-1 is an
example of a model, but in this case, it is a model of a human being.
Figure 1-1
21b. What essential characteristics of a human being does it capture? What characteristics does it push
into the background?
21c. Why do you think such a simple drawing was used to illustrate the concept of a model? Would a
more realistic drawing make for a better model?
22. Models of positive economics typically assert that people weigh costs and benefits in a consistent
manner. That is, if the benefits of following a particular course of action exceed the costs, then
that action will be taken, otherwise it will not.
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of Germinal, 271;
of Prairial, 272;
of Vendémiaire, 281.
J.
K.
Kellermann, 255.
L.
Lacretelle, 264.
Lacroix, 237.
Lakanal, 216.
Lally-Tollendal, 100.
Laplanche, 231.
Lecarpentier, 216.
Linguet, 107.
Locke, 110
Loire, war on the, 205.
Louis XI, 5.
M.
Malmesbury, 277.
Manfredini, 42.
Maréchaussée, the, 8.
Maret, 108.
Masséna, 274.
Maury, 99.
Messidor, 228.
Milhaud, 274.
Moreau, 274.
Morelly, 36.
N.
Newton, 110.
Ney, 274.
Nivôse, 227.
P.
Paris, excitement and distress in, 26, 51, 58, 59, 60, 67, 68, 69,
133,
136, 171, 173;
influence of, on finance of Constituent Assembly, 89, 95;
clubs in, 105, 106, 144;
numbers of Jacobins in, 143;
government of, 145-147;
Prison Massacres in, 175-179;
agitation against Louis, 171, 173, 191;
the Girondists and, 193, 196-205;
under the Terror, 222-228, 242, 260;
Reaction in, 263, 264, 271, 272, 273, 279, 281.
Paris, Parlement of, 49, 50.
Payan, 256.
Pluviôse, 228.
Pombal, 42.
Prairial, 228.
See Insurrection.
Q.
Quesnai, 36.
R.
Reynaud, 217.
Richard, 274.
Santerre, 172.
Sémonville, 126.
Sergent, 178.
Soult, 274.
Suvórof, 277.
T.
Talon, 126.
Thermidor, 228;
insurrection of, 259, 260.
Thibeaudeau, 263.
Thugut, 276.
Tronchet, 103.
V.
Vacheron, 231.
Vendémiaire, 227;
insurrection of, 281.
Ventôse, 228.
Victor, 274.
Volney, 107.
W.
Westermann, 237.
Y.
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