Question

classify the following scenarios as examples of frictional, structural, or cyclical unemployment. a. nava just finished her computer science degree and wants to live in austin. there are lots of openings for people with her skills, but she wants to be sure to find a job that is a good fit for her. she moves and crashes on a friends couch while she interviews for jobs. b. a food - processing factory decides to increase wages by 50% above what their competitors are paying. they find that fewer workers quit or call in sick and that they have lower spoilage rates as a result of the more consistent, productive workforce. their competitors respond by raising wages as well. the quantity of labor supplied in the industry increases to take advantage of the higher wages, but the employers do not choose to hire additional workers. the higher wage results in unemployment. c. li wei owns a homebuilding company. during a severe downturn in the housing market, he has to fire many of his subcontractors. d. which of the three types of unemployment will always persist even if the wage is at the equilibrium level?

Explanation:

• a. Frictional unemployment: Nava is looking for a job that suits her skills and location preferences. Frictional unemployment occurs when workers are in the process of moving between jobs or entering the labor - market for the first time.
• b. Structural unemployment: The factory is changing its wage structure due to competition, and workers are leaving. Structural unemployment is caused by a mismatch between the skills workers have and the skills demanded by employers, or by changes in the structure of the industry.
• c. Cyclical unemployment: Li Wei has to fire workers during a downturn in the housing market. Cyclical unemployment is related to the business cycle, rising during economic recessions and falling during expansions.
• d. Structural unemployment: Structural unemployment persists even at equilibrium wage as it is due to long - term changes in the economy like technological changes or industry restructuring.

Answer:

a. Frictional unemployment
b. Structural unemployment
c. Cyclical unemployment
d. Structural unemployment