Question 1

If union action leads to a rise in the relative price of factors that are substitutes for union labor,

Accepted Answer

A) the supply of union labor falls. 
B) the quantity demanded of union labor falls. 
C) the demand for union labor rises. 
D) the supply of union labor rises. 
A) the supply of union labor falls. 
B) the quantity demanded of union labor falls. 
C) the demand for union labor rises. 
D) the supply of union labor rises.

Question 2

Under the traditional view of unions, unionization leads to __________ prices because unions __________.

Accepted Answer

A) higher; have a negative impact on the productivity of the workers 
B) lower; have a positive impact on the productivity of the workers 
C) stable; demand long and stable wage contracts from their employers 
D) none of the above 
A) higher; have a negative impact on the productivity of the workers 
B) lower; have a positive impact on the productivity of the workers 
C) stable; demand long and stable wage contracts from their employers 
D) none of the above

Question 3

Exhibit 27-10
​
  
-Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, it will hire __________ quantity of labor and pay its workers the wage rate of __________.

Accepted Answer

A) Q2; W3 
B) Q2; W1 
C) Q1; W2 
D) Q1; W4 
E) none of the above 
A) Q2; W3 
B) Q2; W1 
C) Q1; W2 
D) Q1; W4 
E) none of the above

Question 4

Unions provide training programs in an attempt to increase the marginal physical product of union labor, thus shifting the union demand for labor curve rightward.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is false?

Accepted Answer

A) The evidence seems to show that there are only a few, if any, instances of pure monopsony in the real world. 
B) In a monopsony setting, it is possible for a minimum wage to actually increase the number of workers hired. 
C) Although in a monopsony setting it is possible for a minimum wage to actually increase the number of workers hired, it is not possible to raise wage rates continually and always increase employment, too. 
D) The marginal factor cost for a monopsonist is less than the wage rate it pays workers. 
A) The evidence seems to show that there are only a few, if any, instances of pure monopsony in the real world. 
B) In a monopsony setting, it is possible for a minimum wage to actually increase the number of workers hired. 
C) Although in a monopsony setting it is possible for a minimum wage to actually increase the number of workers hired, it is not possible to raise wage rates continually and always increase employment, too. 
D) The marginal factor cost for a monopsonist is less than the wage rate it pays workers.

Question 6

Unions often encourage the buying public to "look for the union label" primarily because

Accepted Answer

A) they feel that only U.S.and/or union-made goods are of high quality. 
B) they feel that it is un-American to buy goods from foreign producers. 
C) doing so may increase demand for the product they produce, which in turn may increase the wage rate paid to union employees. 
D) they realize that Americans are too busy to take time to gather all the important information about a product and these labels are a way of informing the buying public that union-made goods are well made. 
A) they feel that only U.S.and/or union-made goods are of high quality. 
B) they feel that it is un-American to buy goods from foreign producers. 
C) doing so may increase demand for the product they produce, which in turn may increase the wage rate paid to union employees. 
D) they realize that Americans are too busy to take time to gather all the important information about a product and these labels are a way of informing the buying public that union-made goods are well made.

Question 7

The marginal factor cost of labor for a monopsonist is

Accepted Answer

A) equal to the wage rate because if the monopsonist wants to hire another worker, it can do so at the old wage rate. 
B) less than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate paid to all workers. 
C) less than the wage rate because if the monopsonist wants to hire another worker, it has to lower the wage rate paid to all workers. 
D) greater than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate paid to all workers. 
A) equal to the wage rate because if the monopsonist wants to hire another worker, it can do so at the old wage rate. 
B) less than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate paid to all workers. 
C) less than the wage rate because if the monopsonist wants to hire another worker, it has to lower the wage rate paid to all workers. 
D) greater than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate paid to all workers.

Question 8

What relationship exists between marginal factor cost (MFC) and wage for a monopsony firm? Explain why this is so.

Accepted Answer

MFC is greater than wage for a monopsony

Question 9

The lower the elasticity of demand is for labor, the greater will be the cutback in labor for any given wage increase.

Accepted Answer

A) True 
 B)False

Question 10

To increase the wages of its members, a labor union might attempt to

Accepted Answer

A) lower the elasticity of demand for its labor. 
B) increase the demand for union labor. 
C) increase the supply of union labor. 
D) a and b 
E) all of the above 
A) lower the elasticity of demand for its labor. 
B) increase the demand for union labor. 
C) increase the supply of union labor. 
D) a and b 
E) all of the above

Question 11

As evidenced by one of the exhibits in the textbook, union wages are ___________ higher than non-union wages in the same industry.

Accepted Answer

A) always 
B) sometimes 
C) rarely 
D) never 
A) always 
B) sometimes 
C) rarely 
D) never

Question 12

Assuming the wage-employment tradeoff exists, if labor in a particular geographic area is homogeneous and the unionized workers successfully negotiate a higher wage rate, then

Accepted Answer

A) nonunion workers will also experience an increase in their wages. 
B) nonunion workers will not be affected by what happens in the unionized labor market. 
C) the nonunion labor market will experience an increase in the number of workers, and this will cause wage rates to decrease in this market. 
D) nonunion workers will become members of the union that has just negotiated a wage increase because they want higher wages. 
A) nonunion workers will also experience an increase in their wages. 
B) nonunion workers will not be affected by what happens in the unionized labor market. 
C) the nonunion labor market will experience an increase in the number of workers, and this will cause wage rates to decrease in this market. 
D) nonunion workers will become members of the union that has just negotiated a wage increase because they want higher wages.

Question 13

The total wage bill of a union will be maximized when the elasticity of demand for labor is unit elastic.

Accepted Answer

A) True 
 B)False

Question 14

If a labor union tries to reduce the availability of substitutes for the product it sells, it is attempting to affect the __________ for labor. But if it tries to increase substitute factor prices, it is attempting to affect the __________ labor.

Accepted Answer

A) elasticity of demand; supply of 
B) demand; elasticity of demand for 
C) elasticity of demand; demand for 
D) demand; supply of 
E) none of the above 
A) elasticity of demand; supply of 
B) demand; elasticity of demand for 
C) elasticity of demand; demand for 
D) demand; supply of 
E) none of the above

Question 15

Exhibit 27-6
​
  
-Refer to Exhibit 27-6. L and W are the equilibrium quantity of labor employed and the wage rate respectively. A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say that the exhibit is an illustration of the fact that

Accepted Answer

A) perfect competition entails labor exploitation. 
B) monopoly entails labor exploitation. 
C) monopoly entails no labor exploitation. 
D) monopsony entails labor exploitation. 
E) monopsony entails no labor exploitation. 
A) perfect competition entails labor exploitation. 
B) monopoly entails labor exploitation. 
C) monopoly entails no labor exploitation. 
D) monopsony entails labor exploitation. 
E) monopsony entails no labor exploitation.

Question 16

In the United States, the percentage of national income that goes to labor (union plus nonunion) was higher when union membership was relatively high and unions were strong, compared to when union membership was relatively low.

Accepted Answer

A) True 
 B)False

Question 17

Right-to-work laws

Accepted Answer

A) say that everyone has the right to work and that it is the responsibility of the government to make available employment opportunities. 
B) ensure that employers cannot prevent persons from gaining employment simply because they are members of a union. 
C) allow everyone to gain employment at a firm without being a union member but also require that once hired the employee must join the union. 
D) make it illegal to require union membership for purposes of employment. 
A) say that everyone has the right to work and that it is the responsibility of the government to make available employment opportunities. 
B) ensure that employers cannot prevent persons from gaining employment simply because they are members of a union. 
C) allow everyone to gain employment at a firm without being a union member but also require that once hired the employee must join the union. 
D) make it illegal to require union membership for purposes of employment.

Question 18

In a perfectly competitive industry, do higher wages for labor union members diminish profits?

Accepted Answer

A) Yes, in the short run, but not in the long run in which some firms exit the industry because of higher costs. 
B) Yes, in the long run, but not in the short run because profits are always fixed in the short run. 
C) No, higher wage costs can affect profits only if they affect labor productivity and this doesn't happen. 
D) No, because higher labor costs usually bring more firms into the industry and this effect dampens price rises. 
A) Yes, in the short run, but not in the long run in which some firms exit the industry because of higher costs. 
B) Yes, in the long run, but not in the short run because profits are always fixed in the short run. 
C) No, higher wage costs can affect profits only if they affect labor productivity and this doesn't happen. 
D) No, because higher labor costs usually bring more firms into the industry and this effect dampens price rises.

Question 19

Labor unions obtain higher wages for their members by reducing the profits of the business owners in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 27-3
​
  
-Refer to Exhibit 27-3. Consider the monopsony setting. In the absence of collective bargaining, what wage rate does the profit-maximizing monopsonist pay?

Accepted Answer

A) W1 
B) W2 
C) W3 
D) none of the above 
A) W1 
B) W2 
C) W3 
D) none of the above

Exam 27: Wages Unions and Labor

If union action leads to a rise in the relative price of factors that are substitutes for union labor,

Under the traditional view of unions, unionization leads to __________ prices because unions __________.

Exhibit 27-10 ​ -Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, it will hire __________ quantity of labor and pay its workers the wage rate of __________.

Unions provide training programs in an attempt to increase the marginal physical product of union labor, thus shifting the union demand for labor curve rightward.

Which of the following statements is false?

Unions often encourage the buying public to "look for the union label" primarily because

The marginal factor cost of labor for a monopsonist is

What relationship exists between marginal factor cost (MFC) and wage for a monopsony firm? Explain why this is so.

The lower the elasticity of demand is for labor, the greater will be the cutback in labor for any given wage increase.

To increase the wages of its members, a labor union might attempt to

As evidenced by one of the exhibits in the textbook, union wages are ___________ higher than non-union wages in the same industry.

Assuming the wage-employment tradeoff exists, if labor in a particular geographic area is homogeneous and the unionized workers successfully negotiate a higher wage rate, then

The total wage bill of a union will be maximized when the elasticity of demand for labor is unit elastic.

If a labor union tries to reduce the availability of substitutes for the product it sells, it is attempting to affect the __________ for labor. But if it tries to increase substitute factor prices, it is attempting to affect the __________ labor.

Exhibit 27-6 ​ -Refer to Exhibit 27-6. L and W are the equilibrium quantity of labor employed and the wage rate respectively. A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say that the exhibit is an illustration of the fact that

In the United States, the percentage of national income that goes to labor (union plus nonunion) was higher when union membership was relatively high and unions were strong, compared to when union membership was relatively low.

Right-to-work laws

In a perfectly competitive industry, do higher wages for labor union members diminish profits?

Labor unions obtain higher wages for their members by reducing the profits of the business owners in the short run and in the long run.

Exhibit 27-3 ​ -Refer to Exhibit 27-3. Consider the monopsony setting. In the absence of collective bargaining, what wage rate does the profit-maximizing monopsonist pay?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Under the traditional view of unions, unionization leads to prices because unions .

Exhibit 27-10 -Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, it will hire quantity of labor and pay its workers the wage rate of .

If a labor union tries to reduce the availability of substitutes for the product it sells, it is attempting to affect the for labor. But if it tries to increase substitute factor prices, it is attempting to affect the labor.

Exhibit 27-6 -Refer to Exhibit 27-6. L and W are the equilibrium quantity of labor employed and the wage rate respectively. A person arguing that a worker is being exploited if she is paid less than the value of her marginal product would say that the exhibit is an illustration of the fact that

Exhibit 27-3 -Refer to Exhibit 27-3. Consider the monopsony setting. In the absence of collective bargaining, what wage rate does the profit-maximizing monopsonist pay?