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Labour Economics Question Paper

Labour Economics

Course:Bachelor Of Education

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
SPECIAL/SUPPLEMENTARY
EXAMINATION FOR THE DEGREE OF BACHELOR OF ARTS

AEC 310: LABOUR ECONOMICS
DATE: Monday 6th October 2008 TIME: 1.00pm-3.00pm

INSTRUCTIONS
Answer question 1 or any other 2 questions.

QUESTION ONE
(i) Consider a firm for which production depends on two normal inputs, labour and capital, with price w and r respectively. Initially the firm faces market price w=6 and r=4. These prices then shifts to w=4 and r=2.
(a) In which direction will the substitution affect change the firm’s
employment and Capital Stock.
(b) In which direction will the score effect change the firm’s
employment and capital stock.

(ii) In a particular industry, the labour supply curve is Es=10+w while the labour demand curve is ED=40 - 40w. Where E=level of employment and w=hourly wage.
(a) What is the equilibrium wage and employment if the labour market
is competitive? (6 marks)
(b) What is the unemployment rate? (4 marks)
(c) Suppose the government sets a minimum hourly wage of $8.
How many workers would lose their jobs?
How many additional workers would want a job at the minimum wage?
What is the unemployment rate? (10 marks)

QUESTION TWO
Explain how the wage rate and employment rate are determined in the following
labour market structures.
(a) Perfectly Competitive (5 marks)
(b) Monopoly (5 marks)
(c) Monopsony (5 marks)
(d) Bilateral monopoly (5 marks)

QUESTION THREE
(i) Unemployment is a very serious problem faced by less developed countries.
Discuss the various factors which has lend to increased unemployment level in
developing countries. (10 marks)

(ii)Explain the various policies that can be adopted to minimize the unemployment
rate. (10 marks)

QUESTION FOUR
(a) Labour demand is said to be derived demand, substantiate the above statement.
(6 marks)
(b) Supply curve of labour is backward bending. With the help of a
diagram(s) derive labour supply curve and explain its shape.(10 marks)
(c) Show the effect of trade union on wages rate and employment in a
perfectly competitive labour market. (4 marks)

QUESTION FIVE
Explain the five wage theories that have been put forward by various economists highlighting the weaknesses. (20 marks)

Labour Economics Question Paper

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