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LAE612S-LABOUR ECONOMICS-2ND OPP-DEC 2025 |
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nAm I BIA unlVERSITY
OF SCIEnCE Ano TECH n □ LOGY
FACULTY OF COMMERCE, HUMAN SCIENCE AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ECONOMICS
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QUALIFICATION CODE:
07BECO
LEVEL: 7
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COURSE CODE: LAE612S
COURSE NAME: LABOUR ECONOMICS
SESSION: DECEMBER 2025
PAPER:THEORY
DURATION: 3 HOURS
MARKS: 100
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SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) MR. PINEHAS NANGULA
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MODERATOR: MR ESLON NGEENDEPI
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INSTRUCTIONS
1. Answer ALL the questions
2. Write clearly and neatly.
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3. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Scientific calculator
2. Pen and Pencil
THIS QUESTION PAPER CONSISTS OF _5_ PAGES (Including this front page)
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QUESTION ONE
MULTIPLE CHOICE QUESTIONS
1. The substitution effect in the labour market occurs when:
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[20MARKS]I
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[2 marks]
a) A wage increase raises firm output
b) Firms substitute cheaper inputs for relatively more expensive ones
c) Workers demand more leisure
d) Labour productivity rises
2. A firm will continue to hire additional workers until:
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[2 marks]
a) Total product is maximised
b) Marginal product is greater than average product
c) Value for marginal product equals the wage rate
d) Labour supply is exhausted
3. If a worker responds to a wage increase by reducing hours worked, which effect is said to
dominate?
[2 marks]
a) A. Substitution effect
b) B. Income effect
c) C. Both effects are equal
d) D. Neither effect
4. Which of the following scenarios best illustrates the substitution effect dominating in the
labour market?
[2 marks]
a) A professional starts working overtime after a pay raise
b) A retiree cuts back work after receiving a pension
c) A worker maintains the same hours after a small wage change
d) A worker decreases hours after a significant bonus
5. A worker treats leisure as a normal good. If wages rise and the worker reduces hours
worked, this is because:
[2 marks]
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a) Substitution effect dominates
b) Income effect dominates
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c) The worker is indifferent
d) The labour market is perfectly competitive
6. Which statement is TRUE about the income and substitution effects in labour supply?
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[2 marks]
a) The substitution effect always leads to less work
b) The income effect always leads to more work
c) If wages rise, substitution effect tends to increase labor supplied
d) Income and substitution effects cannot occur simultaneously
7. If the substitution effect dominates, the labour supply curve is:
a) Upward sloping
b) Downward sloping
c) Vertical
d) Horizontal
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[2 marks]
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8. Which factor increases the likelihood that the income effect will dominate in labor supply
decisions?
[2 marks)
a) Worker has very low income
b) Worker highly values leisure
c) Wages are decreasing
d) Labor is perfectly elastic
9. Which ofthe following is NOT a unique characteristic ofthe labour market?
[2 marks]
a) Employer only purchases the services of the workers by means of a contractua~
relationship.
b) The worker's personality characteristics can't be fully determined by the employer
before employment starts.
c) The worker's personality characteristics change over time.
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d) The worker's remuneration is affected by personal taxation and his or her standard of
living but is unaffected by inflation.
10. Which of the following group of people is NOT defined as part of the labour force?
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[2 marks]
a) Informal-sector employees
b) Self-employed
c) Unemployed
d) Full-time students
QUESTION TWO
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[30 MARKS]
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a) Production function is Q(K, E) = 10.JK Ez where K is capital and E is employment iri
work hours. The initial cost of employment per hour is N$45.00, cost capital per houri~
N$55 .00 and the total cost available is N$5000. Use the information above to construct
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long-run demand curve for labour when the cost of employment increases to N$65.00.
[20 marks]'
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b) Fill the table below for a hypothetical firm operating as a non-discriminating monopsonist
[10 marks]1
Wage (W)
Employment (E)
Total costs
Marginal
(MC)
cost I
800
1
1300
2
1800
3
2300
4
2800
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a)
f)
b)
g)
c)
h)
d)
i)
e)
j)
QUESTION THREE
[SO MARKS]'
a) If wage rate increases from N$25.00 to N$35.00 but non-labour income and total hours
remain constant.
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18 Leisure [LJ
1. Which effect is dominating in the figure above given that leisure is a normal good.
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Show your calculations and explain your answer.
(15 marks]
ii. Construct individual labour supply curve associated with the change in wage[5 marks]
b) Discuss the differences between atypical and underemployment
(5 marks]
c) Discuss five main differences between capital and labour intensive
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(10 marks]
d) In a water industry, labour supply is Es = 10 + 2w and labour demand is Ed = 24 - 3w.
At the same time, in the beef industry, labour supply is Es = -2 + 2w and labour demand
is Ed = 15 - 2w, where Eis the level of employment and w is the hourly wage.
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i. Calculate the market wage rate in each industry where the unemployment rate is equal
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to zero.
(5 marks]
11. Suppose the government sets a minimum hourly wage ofN$5.50 in both industries, iJ
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an economist, which industry will benefit more from this policy? You are expected
comment based on the unemployment rate in each industry.
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(10 marks]
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All the best