Labour Economics Question Paper

Labour Economics

Course:Bachelor Of Arts (Economics & Sociology)

Institution: Kenyatta University question papers

Exam Year:2009

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
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INSTRUCTIONS
Answer question 1 or any other 2 questions.
Questions
Q.1
(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)

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(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)
Q.2
Explain how the wage rate and employment rate are determined in the following
labour market structures.

Perfectively Competitive

(5 marks)

Monopoly

(5 marks)

Monopsony

(5 marks)

Bilateral monopoly

(5 marks)
Q.3
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)

Explain the various policies that can be adopted to minimize the unemployment

rate.

(10 marks)
Q.4
(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 shap.

(10 marks)
(c)
Show the effect of trade union on wages rate and employment in a
perfectly completive labour market.

(4 marks)
Q.5
Explain the five wage theories that have been put forward by various economists

highlighting the weaknesses.

(20 marks)

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