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Economists Observe Clear Evidence of a Union Wage Premium but Do

Question 83

Multiple Choice

Economists observe clear evidence of a union wage premium but do not observe the clear union effect on employment levels predicted from theory.One explanation for this is


A) that the labour supply curve shifts to the right in the collective bargaining process,thereby eliminating any employment effect.
B) that the labour supply curve,in the presence of a union,is very inelastic,which implies only a very small effect on employment.
C) that union-based advertising for the product increases demand for the product,shifts the demand curve to the right and eliminates any employment effect.
D) the union's ability,through the collective bargaining process,to pressure firms to hire more workers than they otherwise would at the union wage.
E) both C and D are correct.

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