Deck 27: Wages Unions and Labor

Question 1

In 18th century England, higher wages of weavers appears to have led to the invention of the power loom.

Answer 1

True

Question 2

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.

Answer 2

False

Question 3

It is possible for an increase in minimum wage to increase the number of workers hired in a competitive labor market, but not in a monopsony setting.

Answer 3

False

Question 4

A profit-maximizing monopsonist will pay a wage rate that is less than the marginal factor cost.

Question 5

It is unlikely that very many (pure) monopsony firms exist today, given that workers are increasingly mobile.

Question 6

The Taft-Hartley Act allowed the federal government laws regulating the formation of unions to take precedence over (override) union laws enacted by the individual states.

Question 7

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

Question 8

As long as there are advancements in technology, some workers will be temporarily displaced.

Question 9

All economists assert that the National Collegiate Athletic Association (NCAA) is a type of cartel that enforces the monopsony behavior of universities and colleges in the market for college athletes.

Question 10

Some economists contend that the National Collegiate Athletic Association (NCAA) imposes its rules and regulations to keep college sports nonprofessional and in relatively high demand.

Question 11

In the case of a monopsony, higher wage rates (over some range) do not necessarily imply fewer persons working.

Question 12

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

Question 13

For a monopsony, when the firm purchases additional units of a factor, the marginal factor cost (MFC) rises.

Question 14

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.

Question 15

To decrease the supply of its labor, a union might argue against right-to-work laws.

Question 16

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.

Question 17

The supply curve of labor that an employer faces can be changed through successful collective bargaining by a labor union.

Question 18

Labor unions tend to favor strictly enforced immigration laws with the intention of lowering the elasticity of demand for union labor.

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.

Question 20

The traditional view of labor unions is that they enhance worker productivity because the workers feel more secure in their jobs and because there is a low turnover rate in union firms.

Question 21

In collective bargaining,

A)union members act together as a single unit.
B)each union member represents herself in labor-management negotiations.
C)the objective of the union is to increase its bargaining power with management.
D)a and c
E)b and c

Question 22

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)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 23

If a union seeks to maximize the total wage bill received by its members, then it

A)should seek to establish the highest possible wage rate.
B)should seek to establish the lowest possible wage rate.
C)will find that this cannot be done under any circumstances.
D)none of the above

Question 24

Exhibit 27-2
​

Refer to Exhibit 27-2. One of the things that the labor union probably can do to convince management that the supply curve is S'S instead of SS is

A)make a credible threat of a strike.
B)ask workers to take a cut in fringe benefits.
C)try to maximize the wage bill to the union.
D)try to maximize membership in the union.

Question 25

Exhibit 27-1
​

Refer to Exhibit 27-l. Four demand curves for labor are displayed: D₁, D₂, D₃, and D₄. Which provides the most pronounced wage-employment tradeoff?

A)D₁
B)D₂
C)D₃
D)D₄

Question 26

Unions generally call for __________ the barriers against foreign trade, as a way of __________ the elasticity of demand for union labor.

A)lowering; increasing
B)lowering; decreasing
C)raising; increasing
D)raising; decreasing

Question 27

A closed shop is an organization

A)that is closed on holidays.
B)in which an employee must belong to the union before he or she can work.
C)that does not require workers to be union members in order to be hired, but does require them to join the union within a certain period of time after becoming employed.
D)set up by the federal government to train ex-convicts to become productive workers.
E)none of the above

Question 28

Exhibit 27-1
​

Refer to Exhibit 27-l. Four demand curves for labor are displayed: D₁, D₂, D₃, and D₄. Which provides the least pronounced wage-employment tradeoff?

A)D₁
B)D₂
C)D₃
D)D₄

Question 29

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

Question 30

If a union seeks to maximize the total wage bill received by its members, then it should negotiate the

A)highest possible wage rate.
B)wage rate at which all of its members are employed.
C)wage rate that maximizes the firm's profits.
D)wage rate at which the elasticity of demand for workers is 1.
E)wage rate at which the elasticity of demand for workers is at its highest.

Question 31

Union training programs are meant to shift the __________ labor to the __________.

A)demand curve for; left
B)demand curve for; right
C)supply curve of; left
D)supply curve of; right

Question 32

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

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 33

Labor unions generally favor

A)import restrictions.
B)strict immigration laws.
C)increasing the minimum wage.
D)a and c
E)a, b, and c

Question 34

A union shop is an organization that

A)requires individuals to join a union within a certain period of time after becoming employed.
B)requires individuals to be members of the union before they can be hired.
C)is legal in all fifty states.
D)is set up by labor unions to train new entrants and inform members of jobs in different states.
E)a and c

Question 35

Unions are interested in increasing the productivity of their members because as their productivity rises, the __________ their labor __________ and their wages __________.

A)demand for; falls; rise.
B)demand for; rises; rise.
C)supply of; rises; rise.
D)supply of; falls; rise.

Question 36

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

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 37

Sometimes labor unions try to increase the demand for the product they produce. They do so because the demand for labor is derived; and the __________ the demand for the product labor produces, the __________labor and the __________ wages will be, ceteris paribus.

A)higher; greater the supply of; lower
B)higher; lower the demand for; higher
C)higher; higher the demand for; higher
D)lower; higher the demand for; higher

Question 38

The closed shop was prohibited by the

A)Norris-LaGuardia Act.
B)Clayton Act.
C)Wagner Act.
D)Taft-Hartley Act.
E)none of the above

Question 39

Right-to-work laws

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 40

Which of the following is a possible objective of labor unions?

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

Question 41

Which of the following is true for a monopsony?

A)It cannot buy additional units of a factor without increasing the price it pays for the factor.
B)It can buy additional units of a factor without increasing the price it pays for the factor.
C)The supply of labor it faces is the industry supply of labor.
D)a and c
E)b and c

Question 42

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

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 43

Suppose the marginal revenue product of individuals who work in the union sector is greater than that of individuals who work in the nonunion sector. Normally, we would expect labor to move from the nonunionized sector to the unionized sector-from where it is worth less to where it is worth more. But if this cannot happen, owing to the supply-restraining efforts of the union, then

A)wages in the nonunion sector will rise.
B)wages in the union sector will fall.
C)there will be a misallocation of labor---not all labor will be employed where it is most valuable.
D)workers in the union sector will move to the nonunion sector.

Question 44

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

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.
E)b and d

Question 45

Labor unions have caused

A)the fraction of national income that goes to labor (union and nonunion, combined) to increase.
B)the fraction of national income that goes to labor (union and nonunion, combined) to decrease.
C)almost no change in the fraction of national income that goes to labor (union and nonunion, combined).
D)the fraction of national income that goes to profits to rise.

Question 46

A possible objective of labor unions is

A)employment for all their members.
B)minimizing the total wage bill.
C)maximizing income for all union members.
D)all of the above
E)none of the above

Question 47

Exhibit 27-3
​

Refer to Exhibit 27-3. Consider the monopsony setting. In the absence of collective bargaining, what quantity of labor does the profit-maximizing monopsonist hire?

A)Q₁
B)Q₂
C)Q₃
D)none of the above

Question 48

If a firm is a monopsony, then it

A)can pay any price it wants for the factors that it hires.
B)will have to pay the same price to each factor owner that supplies its factor.
C)will have to pay a higher price to purchase additional units of a factor.
D)need not lower the price of its product to induce buyers to purchase additional quantities.

Question 49

Exhibit 27-3
​

Refer to Exhibit 27-3. In the absence of collective bargaining, if the profit-maximizing monopsonist were to pay workers what their services were worth to it, it would pay

A)W₁.
B)W₂.
C)W₃.
D)some wage rate between W₂ and W₃.

Question 50

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

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 51

Which of the following comes closest to being a monopsony?

A)a car manufacturer in Detroit
B)a McDonald's in a big city
C)a coal company who employees all of the workers in a given town
D)a farmer who hires labor

Question 52

If a firm is a monopsonist, then it faces

A)a downward sloping demand curve for its product, and its marginal revenue curve will lie below its demand curve.
B)a horizontal marginal factor cost curve.
C)an upward sloping factor supply curve, and its marginal factor cost curve will lie above the factor supply curve.
D)an upward sloping factor supply curve, and its marginal factor cost curve will coincide with the factor supply curve.
E)an upward-sloping factor supply curve, and its marginal factor cost curve will lie below the factor supply curve.

Question 53

The traditional (or orthodox) view of labor unions is that they

A)positively impact productivity and efficiency.
B)negatively impact productivity and efficiency.
C)drive an artificial wedge between the wages of comparable labor in the union and nonunion sectors of the labor market.
D)a and c
E)b and c

Question 54

Which of the following is not consistent with the view of labor unions as a collective voice?

A)Unions reduce job exiting.
B)Labor productivity declines as a result of labor unions
C)The worker turnover rate is reduced by labor unions.
D)Workers feel more secure in their jobs as a result of labor unions.

Question 55

If a monopsonist is hiring factors, it will choose to hire that quantity of labor at which __________ and pay a wage rate that is __________.

A)MR = MC; equal to labor's MRP
B)the supply curve of labor intersects the demand curve for labor; equal to labor's MRP
C)MRP = MFC; equal to labor's MRP
D)MRP = MFC; less than labor's MRP
E)the supply curve of labor intersects the demand curve for labor; less than MFC

Question 56

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?

A)W₁
B)W₂
C)W₃
D)none of the above

Question 57

A single buyer in a factor market is known as a

A)monopoly.
B)monopsony.
C)oligopsony.
D)pure buyer.

Question 58

The marginal factor cost of labor for a monopsonist is

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 59

Research by H. Gregg Lewis shows that over the period 1929-1979,

A)the average wage of union members was 10 to 15 percent higher than that of comparable nonunion labor.
B)the average wage of union members was 10 to 15 percent lower than that of comparable nonunion labor.
C)labor unions increased productivity.
D)labor unions decreased productivity.
E)none of the above

Question 60

Which of the following statements is true?

A)The traditional view of labor unions predicts that unionization of a firm will result in improvements in productivity and efficiency.
B)The labor union as a collective voice view of labor unions predicts that unionization of a firm will result in decreases in productivity and efficiency.
C)The traditional view of labor unions supports the formation of unions as a counterweight to firms' factor-hiring power.
D)The labor union as a collective voice view of labor unions supports efforts to decrease the unions' role as a "monopolizer of labor."
E)none of the above

Question 61

"Collective bargaining" refers to

A)negotiations between labor unions and management about wage rates and other issues.
B)negotiations among labor unions over jurisdictional control.
C)negotiations between labor, management, and government over the drafting of labor laws.
D)b and c
E)none of the above

Question 62

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

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

Question 63

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

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 64

Exhibit 27-5
​

Refer to Exhibit 27-5. In which case or cases does the increase in the wage rate from W₁ to W₂ definitely cause the total wage bill to rise?

A)(1)
B)(2)
C)(3)
D)(1) and (2)
E)(1) and (3)

Question 65

Exhibit 27-4
​

Refer to Exhibit 27-4. If a labor union successfully organizes the labor market and sets the wage rate at W₄, the quantity of labor hired will be

A)Q₁.
B)Q₂.
C)Q₃.
D)Q₄.
E)cannot be determined

Question 66

For a union to be successful in increasing the total wage bill received by its members by forcing up the wage rate, the demand curve for labor needs to be

A)elastic.
B)perfectly elastic.
C)unitary elastic.
D)inelastic.

Question 67

A monopsonist's wage rate is

A)the same as marginal factor cost.
B)greater than marginal factor cost.
C)less than marginal factor cost.
D)the same as marginal revenue product.
E)a and d

Question 68

To lower the elasticity of demand for labor, a labor union might attempt to

A)decrease the availability of substitutes for the products union workers produce.
B)increase the availability of substitutes for the products union workers produce.
C)increase the availability of substitute factors for union labor.
D)a and c
E)b and c

Question 69

In a monopsony model of the labor market, as more labor is hired, the marginal factor cost of labor

A)decreases.
B)becomes zero.
C)remains constant.
D)increases.
E)becomes identical to the wage rate.

Question 70

A firm that is the sole buyer in a factor market is known as a

A)monopolist.
B)public employee union.
C)monopsonist.
D)perfect competitor.

Question 71

To increase the demand for union labor, a labor union might attempt to

A)increase the demand for the products produced by union labor.
B)decrease substitute factor prices.
C)decrease the marginal physical product productivity of union labor.
D)a and b
E)all of the above

Question 72

Exhibit 27-5
​

Refer to Exhibit 27-5. In case (1), with a rise in the wage rate from W₁ to W₂, the wage bill will fall if

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

Question 73

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

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 74

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

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 75

Exhibit 27-5
​

Refer to Exhibit 27-5. In which of the following cases has the increase in the wage from W₁ to W₂ been brought about by a prolonged successful training program undertaken by the union for the benefit of its members?

A)(1)
B)(2)
C)(3)
D)none of the above

Question 76

A monopsony, as compared to a perfectly competitive firm, pays __________ wage and hires __________ labor.

A)a higher; less
B)a higher; more
C)a lower; less
D)a lower; more
E)the same; the same amount of

Question 77

Exhibit 27-4
​

Refer to Exhibit 27-4. If a labor union successfully organizes the labor market and sets the wage rate at W₄, the amount of unemployment in this market will be equal to

A)Q₄ - Q₃.
B)zero.
C)Q₃ - Q₁.
D)Q₂ - Q₃.
E)Q₄ - Q₁.

Question 78

Unions typically argue that state right-to-work laws

A)are unfair.
B)constrain unions' abilities to control the supply of labor in a market.
C)are inconsistent with the Taft-Hartley Act.
D)legalize union shops.

Question 79

Exhibit 27-5
​

Refer to Exhibit 27-5. In which of the following cases has the increase in the wage from W₁ to W₂ been brought about by a country-wide legalization of union shops?

A)(1)
B)(2)
C)(3)
D)none of the above

Question 80

If, through collective bargaining, a union is able to raise the wage above the existing competitive equilibrium wage,

A)fewer workers will be employed than before the wage increase.
B)more workers will be employed than before the wage increase.
C)the same number of workers will be employed as before the wage increase.
D)the number of workers that will be employed is not related to the wage increase.