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Suppose that all workers in a town belong to a union (monopoly union) and there is a single firm (monopsony) hiring labor in the town. Now, suppose that the supply for labor function the monopsony faces is LS = w (where w refers to wages per day) and the demand for labor function faced by the monopoly union is LD = 90 – 3w. a. Find the wage rate and number of workers that the firm (the monopsony) would like to hire. b. Find the wage rate and level of employment that the union would seek if it behaved as a monopolist union. c. What is the likely outcome?

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Lelia Lubowitz
Lelia LubowitzLv2
7 Apr 2018

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Related questions

Question 1 (1 point) Right-to-work laws in individual states:

make it illegal to require union membership as a condition for continued employment.

were allowed by the Taft-Hartley Act of 1947.

make it illegal to run a "closed shop" in that state.

all of the above.

Question 2 (1 point) In the figure to the right, the wage rate that maximizes the total union member income earned is:

W2.

W1.

W3.

uncertain without more information.

Question 4 (1 point) An example of featherbedding would be:

a union trying to increase worker productivity.

a union trying to increase demand for union labor.

a union trying to increase demand for union-made products.

an act banned by the Taft-Hartley Act.

Question 5 (1 point) The Taft-Hartley Act of 1947 (the Labor Management Relations Act):

is the key legislative act that requires management to bargain with unions.

made certain union practices such as closed-shops illegal.

is the key legislative act that permits unions to organize and to strike.

is perceived by union leaders as the most important legislation enabling unions to improve the wages of their members.

Question 8 (1 point) In order to raise wages above the market level for its workers, a union must:

have monopsony power.

recruit better workers.

have the support of the government.

limit the supply of labor in an industry.

Question 9 (1 point) What are the effects of labor unions on wages and productivity?

Wages are lower for union members than non-union members because union dues are so high.

Productivity increases because the marginal factor cost is equated to the marginal revenue product of labor.

Wages are the same for union members and non-union members.

Productivity does not increase or decrease as the result of unions.

Wages are higher for union members than non-union members.

Productivity may decrease because of the way some collective bargaining rules specify how jobs should be done or productivity may increase due to reduced turnover.

Productivity increases due to reduced turnover or because of the way some collective bargaining rules specify how jobs should be done.

Question 10 (1 point) Under bilateral monopoly, the wage rate is:

indeterminate.

higher than the competitive wage rate.

equal to the competitive wage rate.

lower than the competitive wage rate.

Consider an economy with two labor markets, one for manufacturing workers and one for service workers. Suppose that initially, none is unionized.
a) if manufacturing workers formed a union, what impact would it have on the wages and employment in manufacturing.
b. How would these changes in the manufacturing labor market affect labor supply in the market for service workers. What would happen to the equilibrium wage rate?
 

1. The introduction of a union into a monopsony labor market will cause employment in this market to

A. Rise

B. Fall

C. Remain constant

D. Change in a manner than cannot be determined without additional info.

2. Unions may attempt to increase the demand for union workers by

A. Advocating boycotts of nonunion products

B. Lobbying for trade restrictions

C. Lobbying for laws that restriuct the availability of substitute labor inputs

D. All of the above

E. None of the above

3. As a result of the scale effect associated with a higher wage, the quantity of labor demanded is expected to

A. Fall

B. Rise

C. Remain unchanged

D. Change in an unpredictable manner

4. If a union successfully urges consumers to boycott products produced by nonunion workers, the own-wage elasticity of demand for union labor is reduced

A. Under no circumstances

B. Because the scale effect resulting from a change in the wage will be smaller in magnitude since the boycott lowers the price elasticity of demand for output

C. Because the substitution effect in the labor market resulting from a change in the wage will be smaller in magnitude since the boycott lowers the price elasticity of demand for output

D. Because labor demand falls in response to the boycott

5. union sponsored boycotts of products produced by nonunion workers will affect the elasticity of demand for union workers by affecting the

A. Substitution effect in the labor market

B. Scale effect in the labor market

C. None of the above

6. In a local labor market

A. There are many employers and employees in most local areas

B. Foreign citizens are not allowed to apply for jobs

C. Most employer and employee search is conducted at the national level

D. There are few potential employers and employees in most local areas

7. Economic theory predicts that the cost of general training will be

A. Borne by workers

B. Borne by firms

C. Shared between workers and firms

D. None of the above

8. During a recession, firms are most likely to layoff workers who possess

A. only firm-specific training

B. only general training

9. Productivity is likely to decline by more during a recession for those labor markets in which workers possess a high level of

A. General training

B. Firm-specific training

C. Either general or firm-specific training

D. None of the above

10. Suppose that some previously discouraged workers start looking for work because they become more optimistic about their prospects. The immediate effect of this is expected to be

A. An increase in the unemployment rate

B. A decrease in the unemployment rate

C. An unchanged unemployment rate

D. A reduction in the labor force participation rate

11. The introduction of government-mandated health insurance for all employees would result in a substitution effect that

A. Raises employment and increases the length of the workweek

B. Lowers employment and reduces the length of the workweek

C. Reduces employment and raises the length of the workweek

D. Increases employment and reduced the length of the workweek

12. As the wage rate increases, the quantity of labor demanded will decrease

A. Under no circumstances

B. Only if the substitution effect exceeds the scale effect

C. Only if the scale effect exceeds the substitution effect

D. As a result of both the substitution and scale effects

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