Question 1

Suppose that a union increases wages by 10% but that the impact of this is exactly offset by the union also increasing labor productivity by 10%. Which of the following will occur if the firm can freely set employment levels?

Accepted Answer

The answer of Suppose that a union increases wages by...

Question 2

The efficient contract model implies that

Accepted Answer

The efficient contract model assumes that the union and the employer can negotiate an agreement that will result in a higher level of joint surplus (i.e., both parties are better off) compared to the monopoly union model where the union sets wages at a level that reduces employment and decreases overall surplus. Thus, option A is the correct choice. Option B is true, but it does not fully capture the essence of the efficient contract model. Option C is incorrect because the union can negotiate on both wages and employment levels in the efficient contract model. Option D is also incorrect since the model assumes that both parties have equal negotiating power.

Question 3

Any point on the contract curve will

Accepted Answer

The contract curve represents all possible agreements between the union and the firm where both parties are at least as well off as they would be in monopoly union negotiations. Therefore, any point on the contract curve will make both the union and the firm at least as well off as they would be in monopoly union negotiations. A and B are incorrect because the contract curve does not necessarily make one party better off than they would be in monopoly union negotiations, it only ensures that both parties are better off or at least as well off. D is incorrect because the contract curve represents efficient agreements where there is no way for one side to be worse off than they would be in monopoly union negotiations.

Question 4

Which of the following statements is generally true about unions?

Accepted Answer

Research suggests that unions reduce the dispersion of earnings among workers, with the most significant impact being for lower-skilled workers. While unions can raise wages, the exact percentage varies depending on the industry and region. Public sector unions may have a slightly higher wage advantage than private sector unions, but this is not always the case. The union wage advantage is also not consistently higher in Europe compared to the United States.

Question 5

If both parties are risk neutral, then

Accepted Answer

When both parties are risk neutral, they are indifferent between certain outcomes and uncertain ones with the same expected value, leading to a larger number of potential agreements they might find acceptable, as their decision-making is based solely on expected outcomes rather than risk aversion or seeking.

Question 6

Suppose a study finds than union wages are 10% higher than nonunion wages. This will likely understate the true advantage of working in the union job when

Accepted Answer

When workers losing union jobs seek out non-union jobs, they may be taking a pay cut to do so. Therefore, they are likely to be lower-skilled workers who are willing to accept lower wages. Thus, the wage advantage of unionized jobs is likely to be higher than indicated in the study. The other options (A, B, and D) suggest that the true advantage of union wages may be lower than indicated in the study.

Question 7

A union raises the wage of firm X from $10 to $15 an hour. In which of these cases is there a direct reduction in the social welfare?

Accepted Answer

The answer of A union raises the wage of firm...

Question 8

A vertical contract curve implies that

Accepted Answer

A vertical contract curve implies that both the firm and workers are receiving economic rents, meaning they are both benefiting from the arrangement. The curve represents the range of wage and employment levels that are mutually beneficial for both parties, while also maximizing their respective economic profits. Therefore, the correct answer is A.

Question 9

Suppose the firm's demand for labor is Lᴰ = 100 - W. The supply of labor is perfectly elastic at a wage of $20. If a monopoly union's goal is to maximize total rents (= [W_U - $20] × L), what wage will it seek?

Accepted Answer

The answer of Suppose the firm's demand for labor is...

Question 10

Unions usually have which of the following effects?

Accepted Answer

Unions generally negotiate for better benefits for their members, which can lead to an increase in the fraction of total compensation paid in the form of employee benefits. A, B, and D are not typically observed effects of unions.

Question 11

Suppose all textile workers in the United States formed a union. Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs)?

Accepted Answer

The answer of Suppose all textile workers in the United...

Question 12

Suppose a study found that union wages were 10% higher than nonunion wages. Unions will have actually raised wages by more than 10% when

Accepted Answer

If nonunion employers raise their wages in response to the threat of unionization, this would suggest that unions have a positive impact on wages beyond simply the 10% difference seen in the study. This is because even nonunion employers feel pressure to match or exceed the wages offered by union employers in order to avoid losing employees to unions. A, B, and D would not directly impact the conclusion that unions have raised wages by more than 10%.

Question 13

If both parties become more risk averse, then the contract zone will

Accepted Answer

The answer of If both parties become more risk averse,...

Question 14

Many unions have favored import quotas and tariffs because

Accepted Answer

Unions generally support trade policies that protect the jobs of their members and shift demand towards the goods they produce. Import quotas and tariffs can help achieve this goal by making foreign goods more expensive and less competitive with domestic goods. Option B is incorrect because while unions may argue that import restrictions benefit all Americans, their primary concern is the welfare of their members. Option C is also incorrect as unions generally want to preserve jobs for their members, rather than encouraging employers to substitute labor for other inputs.

Question 15

Which of the following best describes the economic nature of a union?

Accepted Answer

The answer of Which of the following best describes the...

Quiz 13: Unions and the Labor Market

Suppose that a union increases wages by 10% but that the impact of this is exactly offset by the union also increasing labor productivity by 10%. Which of the following will occur if the firm can freely set employment levels?

The efficient contract model implies that

Any point on the contract curve will

Which of the following statements is generally true about unions?

If both parties are risk neutral, then

Suppose a study finds than union wages are 10% higher than nonunion wages. This will likely understate the true advantage of working in the union job when

A union raises the wage of firm X from $10 to $15 an hour. In which of these cases is there a direct reduction in the social welfare?

A vertical contract curve implies that

Suppose the firm's demand for labor is Lᴰ = 100 - W. The supply of labor is perfectly elastic at a wage of $20. If a monopoly union's goal is to maximize total rents (= [W_U - $20] × L) , what wage will it seek?

Unions usually have which of the following effects?

Suppose all textile workers in the United States formed a union. Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs) ?

Suppose a study found that union wages were 10% higher than nonunion wages. Unions will have actually raised wages by more than 10% when

If both parties become more risk averse, then the contract zone will

Many unions have favored import quotas and tariffs because

Which of the following best describes the economic nature of a union?

Quiz 13: Unions and the Labor Market

Suppose that a union increases wages by 10% but that the impact of this is exactly offset by the union also increasing labor productivity by 10%. Which of the following will occur if the firm can freely set employment levels?

The efficient contract model implies that

Any point on the contract curve will

Which of the following statements is generally true about unions?

If both parties are risk neutral, then

Suppose a study finds than union wages are 10% higher than nonunion wages. This will likely understate the true advantage of working in the union job when

A union raises the wage of firm X from $10 to $15 an hour. In which of these cases is there a direct reduction in the social welfare?

A vertical contract curve implies that

Suppose the firm's demand for labor is Lᴰ = 100 - W. The supply of labor is perfectly elastic at a wage of $20. If a monopoly union's goal is to maximize total rents (= [WU - $20] × L) , what wage will it seek?

Unions usually have which of the following effects?

Suppose all textile workers in the United States formed a union. Which of the following will make it more likely the union will ask for a larger wage increase (assuming the union cares about both higher wages and retaining jobs) ?

Suppose a study found that union wages were 10% higher than nonunion wages. Unions will have actually raised wages by more than 10% when

If both parties become more risk averse, then the contract zone will

Many unions have favored import quotas and tariffs because

Which of the following best describes the economic nature of a union?

Suppose the firm's demand for labor is Lᴰ = 100 - W. The supply of labor is perfectly elastic at a wage of $20. If a monopoly union's goal is to maximize total rents (= [W_U - $20] × L) , what wage will it seek?