Question 1

Which of the following statements is false ?

Accepted Answer

A) For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. 
B) For the monopsonist, the supply curve of the factor it buys is different from the marginal factor cost curve. 
C) The monopsonist buys that quantity of a factor at which marginal revenue product equals marginal factor cost. 
D) The monopsonist pays its factors a dollar amount less than its marginal factor cost. 
A) For the monopsonist, marginal factor cost decreases as it buys additional units of a factor. 
B) For the monopsonist, the supply curve of the factor it buys is different from the marginal factor cost curve. 
C) The monopsonist buys that quantity of a factor at which marginal revenue product equals marginal factor cost. 
D) The monopsonist pays its factors a dollar amount less than its marginal factor cost.

Question 2

If a labor union successfully practices collective bargaining against a monopsonist, then

Accepted Answer

A) product price will decrease. 
B) both wages and employment may rise. 
C) both wages and employment may fall. 
D) workers will probably receive a wage further away from their marginal revenue products. 
A) product price will decrease. 
B) both wages and employment may rise. 
C) both wages and employment may fall. 
D) workers will probably receive a wage further away from their marginal revenue products.

Question 3

Which of the following statements is true?

Accepted Answer

A) The fewer the substitute factors for union labor, the higher the elasticity of demand for union labor, and the smaller the cutback in union labor for any given wage increase. 
B) The fewer the substitute factors for union labor, the lower the elasticity of demand for union labor, and the larger the cutback in union labor for any given wage increase. 
C) The more the substitute factors for union labor, the higher the elasticity of demand for union labor, and the smaller the cutback in union labor for any given wage increase. 
D) The more the substitute factors for union labor, the higher the elasticity of demand for union labor, and the larger the cutback in union labor for any given wage increase. 
A) The fewer the substitute factors for union labor, the higher the elasticity of demand for union labor, and the smaller the cutback in union labor for any given wage increase. 
B) The fewer the substitute factors for union labor, the lower the elasticity of demand for union labor, and the larger the cutback in union labor for any given wage increase. 
C) The more the substitute factors for union labor, the higher the elasticity of demand for union labor, and the smaller the cutback in union labor for any given wage increase. 
D) The more the substitute factors for union labor, the higher the elasticity of demand for union labor, and the larger the cutback in union labor for any given wage increase.

Question 4

Two possible ways to increase union wages indirectly are to increase the demand for union labor or increase the supply of union labor.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Exhibit 27-2 ​
 
Refer to Exhibit 27-2. The union wants management to believe the supply curve of labor is S'S instead of SS. What does supply curve S'S represent?

Accepted Answer

A) It represents a situation where management cannot hire workers for less than W2, and if the firm wants to hire more workers than it hires at equilibrium, it will have to pay a wage between W1 and W2. 
B) It represents a situation where management cannot hire workers for more than W2, and if the firm wants to hire more workers than Q2 it will have to pay more than W1. 
C) It represents a situation where management cannot hire workers for less than W2, and if the firm wants to hire more than Q3 workers it will have to pay more than W2. 
D) It represents a situation where management cannot hire Q1 - Q2 workers for less than W2, but that Q3 - Q1 workers can be hired for less. 
A) It represents a situation where management cannot hire workers for less than W2, and if the firm wants to hire more workers than it hires at equilibrium, it will have to pay a wage between W1 and W2. 
B) It represents a situation where management cannot hire workers for more than W2, and if the firm wants to hire more workers than Q2 it will have to pay more than W1. 
C) It represents a situation where management cannot hire workers for less than W2, and if the firm wants to hire more than Q3 workers it will have to pay more than W2. 
D) It represents a situation where management cannot hire Q1 - Q2 workers for less than W2, but that Q3 - Q1 workers can be hired for less.

Question 7

A "closed shop" is

Accepted Answer

A) an organization in which a worker is not required to be a member of the union to be hired, but must become a member within a certain period of time after being employed. 
B) an organization in which an employee must belong to the union before he or she can be hired. 
C) an organization of domestic firms that is closed to foreign firms. 
D) a political organization that seeks to raise tariffs on foreign-produced goods imported into the United States. 
A) an organization in which a worker is not required to be a member of the union to be hired, but must become a member within a certain period of time after being employed. 
B) an organization in which an employee must belong to the union before he or she can be hired. 
C) an organization of domestic firms that is closed to foreign firms. 
D) a political organization that seeks to raise tariffs on foreign-produced goods imported into the United States.

Question 8

In a monopsony model of the labor market, the firm finds that (over a range)as more workers are hired, the wage rate

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) remains identical to the marginal factor cost per worker. 
A) increases. 
B) decreases. 
C) remains constant. 
D) remains identical to the marginal factor cost per worker.

Question 9

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 10

Within the perfectly competitive market structure, consider a labor union that manages to obtain higher wages for its members. At the time the union obtains higher wages, the perfectly competitive firms are earning positive economic profits. It follows that

Accepted Answer

A) initially higher wages will reduce profits. 
B) in the long run product prices will be higher because of higher wages. 
C) in the long run the firms in the industry will earn below normal profits. 
D) in the short run the firms in the industry will necessarily earn below normal profits. 
E) a and b 
A) initially higher wages will reduce profits. 
B) in the long run product prices will be higher because of higher wages. 
C) in the long run the firms in the industry will earn below normal profits. 
D) in the short run the firms in the industry will necessarily earn below normal profits. 
E) a and b

Question 11

"Collective bargaining" refers to negotiations

Accepted Answer

A) between labor unions and management about wage rates and other issues. 
B) among labor unions over jurisdictional control. 
C) between labor, management, and government over the drafting of labor laws. 
D) between executives within a company. 
A) between labor unions and management about wage rates and other issues. 
B) among labor unions over jurisdictional control. 
C) between labor, management, and government over the drafting of labor laws. 
D) between executives within a company.

Question 12

If a labor union specifies that certain jobs can only be done by certain people (for example, only electricians can do electrical work), it is most likely trying to

Accepted Answer

A) raise the elasticity of demand for its labor. 
B) reduce the availability of substitute factors for its labor. 
C) increase the marginal physical product of its members. 
D) decrease the marginal physical product of its members. 
A) raise the elasticity of demand for its labor. 
B) reduce the availability of substitute factors for its labor. 
C) increase the marginal physical product of its members. 
D) decrease the marginal physical product of its members.

Question 13

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 
A) Q2; W3 
B) Q2; W1 
C) Q1; W2 
D) Q1; W4

Question 14

Exhibit 27-5 ​
 
Refer to Exhibit 27-5. In case (3), with a rise in the wage rate from W1 to W2, the wage bill will rise if

Accepted Answer

A) Q1 x W3 > Q2 x W1. 
B) (Q3 - Q2)x W3 > Q1 x W1. 
C) (W2-W1)x Q2 > (Q1 - Q2)x W1. 
D) (W2 - W3)x Q2 > (W2 - W3)x (Q3 - Q2). 
A) Q1 x W3 > Q2 x W1. 
B) (Q3 - Q2)x W3 > Q1 x W1. 
C) (W2-W1)x Q2 > (Q1 - Q2)x W1. 
D) (W2 - W3)x Q2 > (W2 - W3)x (Q3 - Q2).

Question 15

Exhibit 27-10 ​
 
Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, then the curve represented by the number 2 is its __________ curve, and the curve represented by the number 3 is its __________ curve.

Accepted Answer

A) marginal factor cost; factor supply 
B) factor supply; marginal revenue product 
C) marginal revenue product; average total cost 
D) marginal cost; marginal factor cost 
E) factor supply; marginal factor cost 
A) marginal factor cost; factor supply 
B) factor supply; marginal revenue product 
C) marginal revenue product; average total cost 
D) marginal cost; marginal factor cost 
E) factor supply; marginal factor cost

Question 16

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 17

If a labor union wanted to employ all its membership it would most likely negotiate for a __________ than if it wanted to maximize the income of a limited number of union members.

Accepted Answer

A) wage that discounted for fixed costs 
B) higher wage 
C) wage that accounted for a percentage of sales revenues 
D) lower wage 
A) wage that discounted for fixed costs 
B) higher wage 
C) wage that accounted for a percentage of sales revenues 
D) lower wage

Question 18

Which of the following is not one of the possible objective of labor unions, bearing in mind the wage-employment tradeoff?

Accepted Answer

A) employment for all union members 
B) maximizing the total (union)wage bill 
C) maximizing income for a limited number of union members 
D) maximizing income for all union members 
A) employment for all union members 
B) maximizing the total (union)wage bill 
C) maximizing income for a limited number of union members 
D) maximizing income for all union members

Question 19

A monopsonist firm faces an upward sloping supply of labor curve and its marginal factor cost curve lies below its labor supply curve.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 27-12   Refer to Exhibit 27-12. As the firm increases employment from 3 to 4 workers, its marginal factor cost (MFC)is

Accepted Answer

A) $7.50. 
B) $26. 
C) $48. 
D) $13. 
A) $7.50. 
B) $26. 
C) $48. 
D) $13.

Exam 14: Wages, Union, and Labor

Which of the following statements is false ?

If a labor union successfully practices collective bargaining against a monopsonist, then

Which of the following statements is true?

Two possible ways to increase union wages indirectly are to increase the demand for union labor or increase the supply of union labor.

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

Exhibit 27-2 ​ Refer to Exhibit 27-2. The union wants management to believe the supply curve of labor is S'S instead of SS. What does supply curve S'S represent?

A "closed shop" is

In a monopsony model of the labor market, the firm finds that (over a range)as more workers are hired, the wage rate

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.

Within the perfectly competitive market structure, consider a labor union that manages to obtain higher wages for its members. At the time the union obtains higher wages, the perfectly competitive firms are earning positive economic profits. It follows that

"Collective bargaining" refers to negotiations

If a labor union specifies that certain jobs can only be done by certain people (for example, only electricians can do electrical work), it is most likely trying to

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 __________.

Exhibit 27-5 ​ Refer to Exhibit 27-5. In case (3), with a rise in the wage rate from W1 to W2, the wage bill will rise if

Exhibit 27-10 ​ Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, then the curve represented by the number 2 is its __________ curve, and the curve represented by the number 3 is its __________ curve.

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

If a labor union wanted to employ all its membership it would most likely negotiate for a __________ than if it wanted to maximize the income of a limited number of union members.

Which of the following is not one of the possible objective of labor unions, bearing in mind the wage-employment tradeoff?

A monopsonist firm faces an upward sloping supply of labor curve and its marginal factor cost curve lies below its labor supply curve.

Exhibit 27-12 Refer to Exhibit 27-12. As the firm increases employment from 3 to 4 workers, its marginal factor cost (MFC)is

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility 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

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Exhibit 27-2 Refer to Exhibit 27-2. The union wants management to believe the supply curve of labor is S'S instead of SS. What does supply curve S'S represent?

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 .

Exhibit 27-5 Refer to Exhibit 27-5. In case (3), with a rise in the wage rate from W₁ to W₂, the wage bill will rise if

Exhibit 27-10 Refer to Exhibit 27-10. If the firm in the exhibit is a monopsony, then the curve represented by the number 2 is its curve, and the curve represented by the number 3 is its curve.