Deck 16: Wages and Employment: Monopsony and Labor Unions

Question 1

A person's willingness to work depends on whether the labor market is competitive or monopsonistic.

Answer 1

False

Question 2

A monopsonist whose workers have unionized hires the same number of workers as if they had not unionized.

Answer 2

True

Question 3

A union can always get the wage rate it demands from a monopsonist, but not from a perfectly competitive employer.

Answer 3

False

Question 4

An employer's right to hire whomever he or she wants is safeguarded in a union shop.

Question 5

The Congress of Industrial Organizations was made up of an organization of craft unions.

Question 6

Union membership has increased continuously in the United States since the 1950s.

Question 7

The merger of craft and industrial unions occurred in 1955 with the creation of the AFL-CIO.

Question 8

The single most important piece of labor legislation, the Magna Carta of labor unions, is the Taft-Hartley Act.

Question 9

A series of pro-labor laws were enacted by President Roosevelt and the U.S. Congress primarily as a result of the plight of workers during the Great Depression.

Question 10

The Civil Rights Act of 1964 was designed to protect workers from institutionalized union power that resulted in racial and sexual discrimination.

Question 11

Membership in unions decreased rapidly in the 1980s.

Question 12

If the wage rate is fixed, MLC > wage

Question 13

Unions often face a tradeoff between higher wage rates and employment.

Question 14

In a union shop, prospective employees must be union members before they can be hired.

Question 15

If the demand for the finished good is elastic, the demand for the resources used to produce that good will be inelastic.

Question 16

Labor's Magna Carta was the Wagner Act.

Question 17

Returns to monopsony power occur because the wage rate < MRP for the last worker hired.

Question 18

If the supply curve of labor facing the firm is upward sloping, the wage rate and the MLC are identical.

Question 19

Monopsony firms will hire more workers than they would if the labor market were competitive.

Question 20

Strikes are a form of legitimized extortion by which workers withhold labor to extract higher returns for management.

Question 21

The monopsonist's marginal labor cost curve always lies below the labor supply curve.

Question 22

The only purpose of labor unions is to form a more cohesive bargaining entity to offset the bargaining power of employers in the labor market.

Question 23

In a monopsonistic market, a firm's demand curve for labor is equal to its marginal revenue product and has a nonzero slope.

Question 24

Industrial unions offer membership to all workers in a specific industry.

Question 25

Early union activity in the late 18th and early 19th centuries in the United States was halted by court decisions holding that unions constituted criminal conspiracies.

Question 26

Unskilled workers first gained union representation under the Congress of Industrial Organization in 1935.

Question 27

The Wagner Act of 1935 guaranteed the right of union representation for minorities.

Question 28

If the demand for labor is highly inelastic, an increase in wages secured by the union will cause a big increase in unemployment among union workers.

Question 29

The union shop represents a compromise over labor's control of the labor supply.

Question 30

A yellow dog contract prohibits workers from joining unions.

Question 31

Closed shops are shops that are closed to union members.

Question 32

In the United States, union membership reached its peak in both numbers and percent of the labor force in the decade between 1970 and 1980.

Question 33

The negotiation process between an employer and a union is described as collective bargaining.

Question 34

Monopsony power is akin to an age-old proposition in economics that scarcity brings power, except in this case power is due to scarce

A) resources
B) input purchases
C) suppliers
D) purchasing time
E) product market

Question 35

-Susie's Cream Ale Factory has collected the information shown in Exhibit P-1 pertaining to her business in a small rural community. She sells her product for $12 per case in a highly competitive micro brewery market. Susie should hire ______ workers.

A) 20
B) 30
C) 40
D) 50
E) 60

Question 36

-Referring to the data in Exhibit P-1 for Susie's Cream Ale Factory, the marginal revenue product of the 30th worker is

A) 14
B) 18
C) 96
D) 16
E) 60

Question 37

-In Exhibit P-1 for Susie's Cream Ale Factory the marginal labor cost of the 50th worker is

A) 18
B) 26
C) 640
D) 900
E) 22

Question 38

-According to Exhibit P-1, if Susie's Cream Ale Factory chooses to produce 210 cases of ale, the marginal revenue from the last case will be

A) 132
B) 10
C) 12
D) 14
E) 120

Question 39

-If the price of cream ale rises to $15 per case, what will the marginal revenue product of Susie's 40th worker be (refer to Exhibit P-1)?

A) 75
B) 600
C) 60
D) 750
E) 16

Question 40

If the supply curve of labor facing a firm is upward sloping, this implies that

A) the firm is unable to hire additional workers
B) to hire additional workers, the firm must increase the wage rate
C) any number of workers can be hired at a fixed wage
D) additional workers can be hired at lower wage rates
E) the demand curve for the firm's good must be horizontal

Question 41

The supply of labor does not depend upon

A) the demand for labor
B) the amount of wealth held by workers
C) the size of the population
D) alternative employment opportunities
E) the location of the work place

Question 42

For a monopsonist

A) wage rate > TLC
B) wage rate > MLC
C) wage rate = MLC
D) wage rate = MRP
E) wage rate < MLC

Question 43

-In Exhibit P-3, the wage rate required to hire 12 laborers is

A) $5.80
B) $6.00
C) $6.50
D) $6.80
E) $7.00

Question 44

-In Exhibit P-3, the total labor cost of hiring 12 laborers is

A) $17.80
B) $63.80
C) $102.70
D) $81.60
E) $6.80

Question 45

-In Exhibit P-3, the marginal labor cost of the 13th laborer is

A)$102.70
B) $17.80
C) $7.90
D) $21.10
E) $17.80.

Question 46

-In Exhibit P-3, the total labor cost of hiring 15 laborers is

A) $11.50
B) $46.50
C) $172.50
D) $126.00
E) $23.30

Question 47

-In Exhibit P-3, the marginal labor cost of the 14th laborer is

A) $9.00
B) $126.00
C) $46.50
D) $23.30
E) $28.80

Question 48

-In Exhibit P-3, the wage rate required to hire 14 laborers is

A) $5.50
B) $8.10
C) $8.80
D) $9.00
E) $9.50

Question 49

The return to monopsony power is

A) (MRP - MLC) × (number of workers)
B) (MRP - wage) × (number of workers)
C) (MLC - wage) × (number of workers)
D) (TR - TLC) ?????× (number of workers)
E) (TLC - MRP) × (number of workers)

Question 50

In monopsonistic markets, workers are paid less than their

A) MRP
B) MLC
C) wage rate
D) marginal product
E) marginal revenue

Question 51

-In Exhibit P-4, this exhibit describes a monopsonistic labor market because the

A) MRP curve slopes downward
B) market labor supply curve is horizontal
C) upward-sloping MLC curve lies above the upward-sloping labor supply curve
D) downward-sloping MRP curve lies below the upward-sloping labor supply curve
E) labor supply curve intersects the MRP curve

Question 52

-In Exhibit P-4, the firm will hire ___________ workers and pay a wage rate of___________.

A) 60; $35
B) 60; $25
C) 60; $27
D) 70; $30
E) 70; $25

Question 53

-In Exhibit P-4, this profit-maximizing monopsonist's return to monopsony power is

A) $5
B) $300
C) $480
D) $180
E) $8

Question 54

-In Exhibit P-4, suppose this labor market becomes unionized by a powerful union that increases the wage rate to $35. The new profit-maximizing position for this firm yields a new return to monopsony power of

A) $300
B) $200
C) $320
D) $0
E) $400

Question 55

Workers who organize to bargain collectively for wages and working conditions form a

A) joint council
B) labor cartel
C) labor federation
D) collective
E) labor union

Question 56

If the union and management cannot come to terms on a labor contract, one legal weapon the union can employ to put pressure on management is to

A) engage in industrial sabotage
B) strike
C) reveal the firm's trade secrets
D) spread false rumors about the financial health of the firm
E) engage in collective bargaining

Question 57

The process of negotiation between union and management to arrive at a labor contract is called

A) arbitration
B) mediation
C) reconciliation
D) collective bargaining
E) impasse

Question 58

A union shop exists when the

A) employer is only permitted to hire union members
B) union is the owner of the firm
C) union members are not allowed to be hired
D) employer can hire nonunion workers, but the workers must join the union within a certain time period
E) only stockholders in the firm are also employees

Question 59

If an employer can hire nonunion workers, but these workers must join the union within a certain period of time, the workplace is called a(n)

A) closed shop
B) collective shop
C) agency shop
D) union shop
E) open shop

Question 60

A union that succeeds in raising the wage rate

A) will typically induce more workers into the industry
B) will typically not create unemployment
C) will typically open union membership to all who wish to join
D) is typically in collusion with the firm
E) is typically required to share a portion of its gain with nonunion members

Question 61

Which of the following is not a technique that unions have to control the supply of labor?

A) control apprenticeship programs
B) control membership dues
C) establish a closed shop
D) decrease the MRP curve of labor
E) limit the number of workers allowed into the union

Question 62

A closed shop exists when the

A) employer is only permitted to hire union members
B) union is the owner of the firm
C) union members are not allowed to be hired
D) employer can hire nonunion workers, but the workers must join the union within a certain time period
E) firm goes bankrupt and workers lose their jobs

Question 63

If the employer is only permitted to hire members of the labor union, the workplace iscalled a(n)

A) closed shop
B) collective shop
C) agency shop
D) union shop
E) open shop

Question 64

A closed shop and a union shop differ primarily in that

A) nonunion workers can retain employment in a union shop, but not in a closed shop
B) nonunion workers can retain employment in a closed shop, but not in a union shop
C) union members are not permitted to work in a closed shop, and a worker must be a union member to work in a union shop
D) in a closed shop, workers must be union members before they are hired but not in a union shop
E) workers must first be union members to work in a union shop

Question 65

The more elastic is the demand for the good, the

A) more elastic will be the demand for the resources used to produce the good
B) less elastic will be the demand for the resources used to produce the good
C) less effect any given wage rate increase will have on employment
D) higher the wage rate increase the union can achieve without causing unemployment
E) more elastic will be the supply of resources used to produce this product

Question 66

The American Federation of Labor was organized

A) along ethnic lines
B) into geographic unions
C) as part of the Democratic Party
D) as an industrial union
E) along craft lines

Question 67

A craft union is a union

A) organized on the basis of the workers' industry
B) organized on the basis of workers' skills
C) organized by an employer
D) whose primary goal is to oppose technological advance and to protect the traditional method of working
E) organized by workers in the arts and craft industries

Question 68

An industrial union is a union

A) organized on the basis of the workers' industry
B) organized on the basis of workers' skills
C) organized by an employer
D) whose primary goal is to oppose technological advance and to protect the traditional method of working
E) consisting of all workers in an industrial economy

Question 69

If workers in the auto industry were organized separately into an electrical workers' union, a machinists' union, and a painters' union, these unions would be called

A) agency unions
B) industrial unions
C) skilled unions
D) craft unions
E) federated unions

Question 70

If workers in the auto industry were unionized as auto workers, regardless of their specific jobs in the plant, this union would be called a(n)

A) agency union
B) industrial union
C) skilled union
D) craft union
E) federated union

Question 71

The International Brotherhood of Electricians is an example of a(n)

A) agency union
B) industrial union
C) skilled union
D) craft union
E) federated union

Question 72

The organization that unionized workers along industrial rather than craft lines was the

A) Chamber of Commerce
B) American Federation of Labor
C) National Labor Relations Board
D) Journeymen Stonecutter's Association
E) Congress of Industrial Organization

Question 73

A yellow dog contract is a(n)

A) signed contract by a worker that he/she will not join a union if hired
B) signed contract by a worker that he/she will join a union if hired
C) prolabor provision in a contract that only union members will be employed
D) agreement by a union member that he/she will not join any other union
E) agreement by a worker that he/she will not go on strike

Question 74

To represent a worker, a union must

A) simply receive the worker's permission
B) receive a unanimous approval in an election
C) receive a majority of the workers' votes in an election
D) receive at least two-thirds of the workers' votes in an election
E) receive the permission of the employer

Question 75

Which of the following would be considered an unfair labor practice by a union?

A) a strike called by one union in support of another union's strike
B) calling for a strike
C) demanding a wage rate increase when the firm is in financial trouble
D) boycotting the employer's goods
E) demanding that the employer bargain in good faith

Question 76

Which of the following is not a provision of the Taft-Hartley Act?

A) outlaws the closed shop
B) prohibits union unfair labor practices
C) requires unions to bargain in good faith
D) outlaws striking in support of another union's strike
E) creates the National Labor Relations Board

Question 77

Membership in unions in the United States

A) is slightly over 90 percent of all workers
B) has declined steadily since 1980
C) was hindered by laws such as the Wagner Act
D) can be a grounds for an employer to fire an employee
E) reached an all-time high in 1998

Question 78

The merger in 1955 joined the

A) Teamsters and the Automobile Workers
B) United Mine Workers Union
C) American Federation of Labor and the Congress of Industrial Organization
D) Knights of Labor and the American Federation of Labor
E) Cigar Maker's Union and the Congress of Industrial Organization

Question 79

If the MRP of labor in a firm is $67, and the MLC equals $56, what would you advise the firm to do?

A) Stay at its current output level.
B) Hire additional workers.
C) Raise prices.
D) Reduce employment.
E) Reduce the wage rate.

Question 80

Suppose a previously competitive labor market turns into a monopsony. The labor supply curve faced by the new monopsonist is

A) above the labor supply curve under perfect competition
B) the market supply curve of labor
C) below the labor supply curve under perfect competition
D) changed because workers are now more willing to supply labor
E) perfectly horizontal