Deck 14: Unions and Collective Bargaining

Question 1

Which of the following statements is false?

A) Inefficient work rules that hamper productivity come at the expense of the firm's profits.
B) The firm is indifferent between the various wage/employment combinations that exist along the contract curve.
C) The union prefers higher iso-utility or indifference curves to lower ones.
D) The labour demand curve intersects isoprofit curves at their maximum points.
E) The contract curve does not exist if the product market in which the firm operates is perfectly competitive.

Answer 1

B

Question 2

The unionization rate will tend to be higher when all of the following apply, except:

A) The higher the wage and the smaller the employment loss from becoming unionized
B) The more competitive of the product market
C) The lower the costs of organizing labour into unions
D) The greater the rents that the targeted firm earns in the product market
E) The longer that the employee expects to be working at the firm

Answer 2

B

Question 3

According to the model of union behaviour, all of the following are possible objectives for union behaviour, except:

A) maximizing the employment level for its members.
B) maximizing the wage bill (wage multiplied by employment) that its members receive.
C) improving the working conditions as much as possible.
D) maximizing the economic rent that its members receive.
E) maximizing the wage rate that its members receive.

Answer 3

C

Question 4

The overall strength of a union movement depends on all of the following factors, except:

A) the activities of employers.
B) the economic environment (state of the business cycle).
C) the legal and regulatory climate in which unions might operate.
D) the strength of the union movement in neighbouring countries.
E) the political climate.

Question 5

The bargaining range refers to:

A) the range of wages for which the efficient contracts are the same as the inefficient contracts.
B) the range for the negotiated employment level such that the firm is not unprofitable and there are no unemployed workers.
C) the range for the negotiated wage such that the firm is not unprofitable and the workers receive at least the alternative wage.
D) the range for the negotiated wage such that the workers make a decent living and the firm is guaranteed a profit.
E) the range for the negotiated wage such that the firm is not unprofitable and the workers receive at least the maximum compensation.

Question 6

Why do labour unions support increases in the minimum wage?

A) The minimum wages tend to increase the demand for unionized labour.
B) It improves the social welfare of its members.
C) Their members benefit directly from the wage increase.
D) The minimum wages tend to increase the supply of unionized labour.
E) It bolsters their reputation of being the defenders of the interests of working people.

Question 7

Over the past 60 years in Canada, the growth in labour unions has tended to be characterized by:

A) a negative but erratic trend.
B) a steadily positive trend.
C) a steadily negative trend.
D) relative stability.
E) a positive but erratic trend.

Question 8

The primary mechanism by which industrial unions typically increase wage rates is:

A) increasing the demand for labour of the firm.
B) imposing a wage rate above the equilibrium rate on the firm.
C) increasing the supply of labour of the firm.
D) decreasing the demand for labour of the firm.

Question 9

Which of the following countries has the highest union density?

A) Japan
B) Canada
C) United Kingdom
D) France
E) United States

Question 10

If a firm operates in a competitive output market, then the higher wages negotiated by a union must:

A) lead to a Pareto-efficient contractl
B) cause it to pass on the cost of the higher wages to its customers in the form of higher product prices.
C) reduce the level of employment at the firm.
D) push the firm off of its labour demand curve and onto the contract curve.
E) increase the level of employment at the firm.

Question 11

The evidence regarding the decline in unionization in Canada has indicated that:

A) there has been a fall in the likelihood that a worker with a given set of characteristics will be unionized.
B) shifts in the industrial and occupational composition of the labour force can explain it.
C) shifts in the demographic composition of the labour force can explain it.
D) workers find it easier to move between industries and countries.
E) this trend has occurred in almost all countries.

Question 12

Which of the following statements concerning the isoprofit curve is false?

A) Isoprofit curves cannot intersect each other.
B) Higher isoprofit curves represent lower levels of profits.
C) It shows all the wage-employment combinations that maximize profits.
D) It shows all the wage-employment combinations that yield the same level of profit for a firm.
E) It crosses the maximum point of the labour demand curve.

Question 13

One recently published theory as to why unionization rates are much higher in Canada than in the U.S. is that:

A) the demographic traits of the labour force in Canada are those that are associated with higher rates of unionization.
B) changes in the U.S. legal regime since the end of World War II related to unions have been less favourable to unionization.
C) Canadians' social and political values are relatively more collectivist and social democratic in nature, and hence less individualistic and free-market oriented.
D) the industrial composition of the labour force in Canada is weighted toward those associated with higher rates of unionization.
E) Canadians' social and political values are relatively less collectivist and social democratic in nature, and hence more individualistic and free-market oriented.

Question 14

Which of the following types of economic behaviour best characterizes a labour union's function?

A) Monopsony
B) Price-taking
C) Monopolistic Competition
D) Oligopoly
E) Monopoly

Question 15

The objective of lengthy and demanding entrance procedures to join a union or a professional group is to:

A) shift the labour demand curve to the left.
B) shift the labour supply curve to the right.
C) shift the labour supply curve to the left.
D) shift the labour demand curve to the right.
E) directly raise the wage that union members receive.

Question 16

What distinguishes the right to manage negotiating regime with the Pareto-efficient negotiating regime?

A) The first regime refers to the set of wage-employment outcomes that lie on the contract curve, while the second refers to the set of wage-employment outcomes that lie on the labour demand curve.
B) In the first regime, there is a tradeoff between wages and employment levels, but that is not the case for the second regime.
C) In the first regime, some of the union members might be unemployed, but that is not possible for the second regime.
D) The negotiated wage is always higher in the second regime than it is in the first regime.
E) In the first regime, the parties bargain only over the wage, while in the second, they bargain over both wages and employment levels.

Question 17

If a union seeks to maximize the total wage bill received by its members:

A) It should seek to attain the alternative wage rate.
B) It should seek to negotiate a Pareto-efficient contract.
C) It cannot be done without driving the firm bankrupt.
D) None of these answers are correct.
E) It should seek to attain the highest possible wage rate.

Question 18

The costs to workers of unionization include all of the following, except:

A) time devoted to union activities.
B) higher taxes.
C) the possibility of a pay settlement that is not in the interests of certain members of the union.
D) loss of pay during job action and strikes.
E) union dues.

Question 19

If the labour union acts to maximize the economic rent that its members receive, what will happen to employment and wages?

A) Wage will be lower than in the case of the absence of a labour union.
B) Employment will be lower than in the case of the absence of a labour union.
C) We cannot tell what the effect on employment would be, but wages will be higher than they would be in the absence of a union
D) Employment will be higher than in the case of the absence of a labour union.
E) We cannot tell what the effect on wages would be, but employment will be higher than it would be in the absence of a union

Question 20

Which of the following statements regarding efficient contracts is false?

A) Efficient contacts are often associated with work rules.
B) Efficient contracts typically involve excessive staffing levels.
C) Given an efficient contract, it is impossible to make one party better off without making the other party worse off.
D) The set of efficient contracts is relevant for the "right-to-manage" bargaining regime.
E) The set of efficient contracts lies to the right of the labour demand curve.

Question 21

The median voter model pertains to which of the following aspects of analyzing union behaviour?

A) Determining the constraints under which the union negotiates
B) Establishing an efficient contract
C) Determining the effective supply of labour
D) Determining the preferences of the union
E) Determining the bargaining strategy

Question 22

The bargaining power that a union has is most closely related to:

A) the quantity demanded of labour.
B) the elasticity of labour supply.
C) the size of the bargaining unit.
D) the elasticity of labour demand.
E) the quantity supplied of labour.

Question 23

A union would be more effective at bargaining a wage increase for its members:

A) if the share of labour costs in total costs is greater
B) if the product demand is less elastic
C) if the degree of substitutability between labour and capital is greater
D) if the product demand is less responsive to a wage change.
E) if the supply of capital.is more elastic

Question 24

Assume that a labour strike ends and that the labour union is successful in negotiating a substantial raise in pay for its workers. Concerns are raised about the motivation of the union and the negative employment consequences of the expensive labour contract.
• Discuss the various possible objectives for the union. There are a number of alternative hypotheses concerning the variable that the union seeks to maximize.
• It is time for you to put on your anti-union hat. The opponents of labour unions typically cite the labour demand curve model to support their claim that the union is destroying jobs. You should present a graph.
• Now it is time for you to put on your pro-union hat. Supporters of unions cite the efficient contract model to support the proposition that unions do not destroy jobs when they bargain for higher wages. If anything, they create jobs. Your analysis should include a graph, and you should clearly distinguish the implications that flow from this model from those that flow from the preceding one (the labour demand curve model). If the wage increase does not arise at the expense of employment, then what variable does the wage increase impinge on?
• As is often the case in this textbook, we are confronted with a series of models which give conflicting predictions. We have to appeal to empirical research in order to answer the question of whether unions bargain solely for higher wages, solely for higher employment levels, or perhaps for some other objective. What does the limited empirical evidence obtained thus far indicate? There is
no need to go into the technical details.
• Assume that the labour demand model does apply after all, which places a constraint on the union's bargaining power. Does the union have any other course of action which could mitigate the disemployment effects associated with a negotiated wage increase? If so, explain.

Question 25

An efficient contract (in the Pareto sense) occurs at the:

A) point of tangency between the firm's isoprofit curve and the labour demand curve.
B) point of tangency between the union's iso-utility (or indifference) curve and the isoquants of the firm.
C) point of tangency between the union's iso-utility (or indifference) curve and the isoprofit curve.
D) point on the labour demand curve corresponding to the alternative wage.
E) point of intersection between the firm's isoprofit curve and the labour demand curve.

Question 26

Approximately what percentage of Canadian paid workers was unionized in 2010?

A) 40%
B) 10%
C) 60%
D) 50%
E) 30%

Question 27

Which of the following statements regarding the labour demand curve is false?

A) It reflects the employer's unconstrained choice for the quantity demanded of labour given a wage level.
B) It represents Pareto-inefficient contracts.
C) It represents a set of wage-employment outcomes such that it is impossible to make one party better off without making the other party worse off.
D) It is typically more elastic than the contract curve.
E) It intersects the isoprofit curves at their highest points.

Question 28

A plumber's union is an example of:

A) a craft union.
B) a public employee union.
C) an industrial union.
D) an employee association.
E) a professional association.

Question 29

Which of the following statements regarding union incidence rates between 2000 and 2005 is true?

A) They rose in both the U.S. and in Canada.
B) They were higher in the U.S. than they were in Canada.
C) They declined in both the U.S. and in Canada.
D) They declined in the U.S. but rose in Canada.
E) They declined in Canada but rose in the U.S.