VCE-ECON-U12 7.1 📋 Practice Exam 4: Question Paper

Practice Exam 4

VCE Economics | Labour Markets, Wages, Inequality and Distribution

Question 1

The demand for labour is described as a ‘derived demand’ because:

A) Workers derive their income from labour
B) The demand for labour is derived from the demand for the goods and services that labour helps produce
C) Labour costs are derived from capital costs
D) Employment is derived from government policy

Question 2

In a perfectly competitive labour market, the equilibrium wage is determined by:

A) Government minimum wage legislation
B) The intersection of labour supply and labour demand
C) Collective bargaining between unions and employers
D) The average wage in the economy

Question 3

The minimum wage in Australia is set by:

A) The Prime Minister
B) The Fair Work Commission — which conducts an annual wage review
C) Individual enterprise agreements only
D) The Reserve Bank

Question 4

A monopsony in the labour market is a situation where:

A) Workers have monopoly power
B) There is only one employer (or a dominant employer) in the labour market for a particular type of worker
C) All workers belong to a union
D) The government is the only employer

Question 5

The Gini coefficient is a measure of:

A) Unemployment
B) Income inequality — a score of 0 is perfect equality; 1 is perfect inequality
C) Inflation
D) Poverty

Question 6

Technological change that replaces routine tasks is most likely to:

A) Increase demand for all types of labour equally
B) Reduce demand for routine-task workers (clerical, manufacturing) while increasing demand for high-skill cognitive and manual workers
C) Eliminate all employment
D) Increase wages for low-skill workers

Question 7

Which of the following is an example of a non-wage determinant of labour supply?

A) The wage rate in this occupation
B) Working conditions, job satisfaction, and the social status of the occupation
C) Government unemployment benefits
D) The demand for the good produced

Question 8

The gender pay gap refers to:

A) The difference between male and female minimum wages (which are legally the same)
B) The difference in average earnings between male and female workers — partly reflecting different occupations, hours, and experience, but also discrimination
C) Only the gap caused by discrimination
D) Pay differences between older and younger women

Question 9

Structural unemployment arises when:

A) The economy is in recession
B) A mismatch between workers’ skills and the skills demanded by employers — due to technological change, industry change, or geographic mismatch
C) Workers voluntarily leave jobs
D) There is insufficient aggregate demand

Question 10

Human capital refers to:

A) The buildings and equipment owned by a firm
B) The knowledge, skills, education and experience embodied in workers — accumulated through education, training and work experience
C) The number of workers in the labour force
D) Financial capital invested in people

Question 11

The labour force participation rate measures:

A) The proportion of the working-age population that is employed
B) The proportion of the working-age population that is either employed or actively seeking work
C) The number of hours worked per week
D) The proportion of jobs that are full-time

Question 12

The Lorenz curve illustrates:

A) The relationship between price and quantity
B) The cumulative share of income received by cumulative shares of the population — used to visualise income distribution
C) The relationship between unemployment and inflation
D) The distribution of wealth across countries

Question 13

Real wages differ from nominal wages in that real wages:

A) Include superannuation
B) Are adjusted for inflation — measuring actual purchasing power
C) Are set by enterprise agreement
D) Are the wages paid to skilled workers only

Question 14

Superannuation in Australia is significant for income distribution because:

A) It reduces wages
B) It compulsorily accumulates retirement savings for all workers (currently 11.5%), helping to reduce reliance on the pension and future inequality in retirement incomes
C) It only benefits high-income earners
D) It is a tax on employers only

Question 15

The skills premium in labour markets refers to:

A) Extra pay for shift work
B) The increasing wage differential between high-skill and low-skill workers — driven by technological change and globalisation
C) Government subsidies for training
D) The wage advantage of union members

Question 16

In Australia, the current unemployment rate is measured by the Australian Bureau of Statistics (ABS) through the:

A) Annual Census
B) Monthly Labour Force Survey — based on a survey of ~26,000 households
C) Tax Office records
D) Centrelink data

Question 17

Enterprise bargaining allows:

A) Individual workers to set their own wages
B) Employers and groups of employees (or unions) to negotiate wages and conditions at the enterprise level, above minimum award rates
C) Employers to set any wage regardless of minimum standards
D) Unions to determine all wages in an industry

Question 18

The ‘working poor’ refers to:

A) Workers who are unemployed
B) People who are in paid employment but still have incomes below the poverty line — often in casual, low-wage or part-time work
C) Retired workers on low pensions
D) Workers who receive welfare payments

Question 19

A wage subsidy provided by the government to employers who hire long-term unemployed workers aims to:

A) Reduce the labour force participation rate
B) Lower the effective labour cost to employers, incentivising hiring, and providing work experience to address skills gaps and hysteresis effects of long-term unemployment
C) Replace the minimum wage
D) Reduce aggregate demand

Question 20

Income inequality in Australia has increased since the 1980s primarily due to:

A) A decrease in the minimum wage
B) Technological change (skills premium), globalisation (competition from low-wage countries), shift from wages to capital income, decline of unions, and growth of part-time/casual work
C) Increases in income tax
D) Reduction in social welfare spending

Question 1 (4 marks)

Question 2 (4 marks)

Question 3 (4 marks)

Question 4 (4 marks)

Question 5 (4 marks)

Question 6 (4 marks)

Question 7 (4 marks)

Question 8 (4 marks)

Extended Response 1(a) (6 marks)

Extended Response 1(b) (3 marks)

Extended Response 2(a) (5 marks)

Extended Response 2(b) (3 marks)