ECON FINAL EXAM ANSWERS
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Occupational licensing has much the same effect as
inclusive unionism.
B. exclusive unionism.
bilateral monopoly.
monopsony.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Occupational licensing
functions essentially the same as inclusiveunionism.
attracts large numbers of workers andtherefore depresses wages.
C. often restricts occupational entry and raises the incomes of license holders.
D. has been declared illegal in the majority of states.
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LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
If an exclusiveunion is successful in restricting the supply of labor, the
wage rate will rise.
quantity of labor demanded will rise.
number of job opportunities in the firm or industrywill increase.
demand for labor curve will shift leftward.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
If an industrial union is formedto bargain with a monopsonisticemployer, then in this labor market,
the resulting wage rate will always be above the competitive level.
B. employment may either increaseor decrease.
employment will increase.
employment will decrease.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
The electricians' union is a goodexample of
exclusive unionism.
an industrial union.
how unions can simultaneously increase wage rates and employment by increasing the demandforlabor.
inclusive unionism.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Labor unions may attempt toraise wage rates by
increasing thesupply of labor.
B. forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
decreasing the demand for labor.
increasing the price ofcomplementary resources.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Construction workersfrequently sponsor politicallobbying in support of greater public spending on highways andpublic buildings. One reasonfor this is to
restrict the supplyof construction workers.
increase the elasticityof demand for construction workers.
C. increase the demand for construction workers.
D. increase the price of substitute inputs.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Unions often oppose increases in the prices of complementary inputs. (For example, truck drivers may oppose increases in taxes on diesel fuel.) They do this because increases in the prices of complementary inputs might
increase the supplyof competing labor throughthe output effect.
increase the supplyof competing labor through the substitution effect.
C. decreasethe demand for union labor throughthe output effect.
D. decreasethe demand for union labor throughthe substitution effect.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Craft unions
attempt toorganize workers at all skill levels in a firm or industry.
have been declared illegal by federal legislation.
C. only organize workerswho have a particular set of skills.
D. attempt to increase the supplyof their particular type of labor.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Labor unions are restrained in their wage demands because
A. legislationlimits annual increases in nominal wages to 6 percent.
B. the labor demand curve is downsloping.
marginal wage cost curves lie above labor supply curvesinmost labor markets.
most unions deal with monopsonists whohavesuperior bargaining power.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
99.
A shift in union labor demand from D1 toD2 in the diagram might be the result of
A. a refusal by union membersto buy theproduct they areproducing.
B. an increase in tariffs on products competingwith those produced by relevant union workers.
increases in the prices of complementary inputs.
a strike (work stoppage) by theunion.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
A union might increase the demandforthe labor services of its members by
A. decreasing thedemand for the productit is producing.
B. decreasingthe prices of complementary inputs.
decreasing the prices of substitute inputs.
increasing theprices of complementary inputs.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Authoritative estimates suggest that currently union workerson the average
achieve nowage advantage over nonunionworkers in the same occupation.
realize a 5 percent wage advantage over nonunionworkers in the same occupation.
realize a 20–30 percent wage advantage over nonunion workers in the same occupation.
D. realizea 15 percent wage advantageover nonunion workers in the same occupation.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
In a labor market characterizedbybilateral monopoly, thewage rate will
A. be logicallyindeterminate.
be established at the level desired bythe union.
be established at the level desired bythe employer.
always be established at the competitive level.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-05 Explain why wages and employment are determined by collective bargaining in a situationof bilateral monopoly.
Test Bank: I Topic: BilateralMonopoly Model
If a singlelarge employer bargainswith an inclusiveunion, the resulting labor market model can best be described as
a cartel.
countervailing power.
C. a bilateral monopoly.
D. an internal labor market.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-05 Explain why wages and employment are determined by collective bargaining in a situationof bilateral monopoly.
Test Bank: I Topic: BilateralMonopoly Model
Bilateral monopolyoccurs where
A. a monopsonistic employer bargains with an inclusive union.
a monopsonistic employer bargainswith an exclusive union.
a craft union bargainswith a purely competitiveemployer.
an industrial union bargains with a purely competitive employer.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-05 Explain why wages and employment are determined by collective bargaining in a situationof bilateral monopoly.
Test Bank: I Topic: BilateralMonopoly Model
105.
Refer tothelabor market diagrams.A monopsonistic labor market is represented by Figure
5.
4.
C. 3.
D. 2.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
106.
Refer tothe labor market diagrams. The tactics of exclusive unionism are portrayed in Figure
4.
3.
2.
D. 1.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
107.
Refer tothe labor market diagrams. The tactics of inclusiveunionism are shown in Figure(s)
5 only.
3 only.
C. 4 and 5.
D. 1 and 2.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
108.
Refer tothe labor market diagrams. The case of bilateral monopoly is represented by Figure
A. 5.
4.
2.
1.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-05 Explain why wages and employment are determined by collective bargaining in a situationof bilateral monopoly.
Test Bank: I Topic: BilateralMonopoly Model
Type: Graph
109.
Refer tothe labor market diagrams. The economic impact of occupational licensing can best be demonstrated through Figure
4.
3.
2.
D. 1.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
110.
Refer tothelabor market diagram, where D is the labordemand curve, S is the labor supply curve,and MRC is the marginal resource(labor) cost curve. If this were a purely competitive labor market, the equilibrium wage rate and level of employment would be
$5 and 3, respectively.
$6 and 4, respectively.
C. $7and 5, respectively.
D. $8and 3, respectively.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
111.
Refer tothe labor market diagram, where D is the labor demandcurve, S is the labor supplycurve, and MRC is the marginal resource (labor) cost curve. If this were a monopsonistic labor market, the equilibrium wage rate and levelof employment would be
A. $5and 3, respectively.
$6 and 4, respectively.
$7 and 5, respectively.
$8 and 3, respectively.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
112.
Refer tothelabor market diagram, where D is the labordemand curve, S is the labor supply curve,andMRC is the marginalresource (labor)cost curve. If an inclusiveunion was formed and was able to get the monopsonist to agree to a $7wage rate, then the monopsonist would
reduce employment from 5 to 3 workers.
reduce employment from 5 to 2 workers.
C. increase employment from 3 to 5 workers.
D. not alter its level of employment.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
113.
Refer tothelabor market diagram, where D is the labordemand curve, S is the labor supply curve,andMRC is the marginalresource (labor)cost curve. If an inclusiveunion was able to get the monopsonist to pay a $6 wage rate, then
the supply curve would be perfectlyelastic for the first four workers,but the MRC curve would beunaffected.
the supply curve would be perfectly elasticfor all workers and the MRC curve would coincidewith it.
C. the supply curve would be perfectlyelastic for the first four workers andtheMRC would be $6 for the first four workers.
D. eight workers would be hired.
AACSB: KnowledgeApplication
Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
114.
Refer tothelabor market diagram, where D is the labordemand curve, S is the labor supply curve,andMRC is the marginalresource (labor)cost curve. An inclusive union could increase thelevel of employment above that which the monopsonist would provide if it could get the monopsonist to agree toanywage rate
A. below $7.
B. between $5 and $8.
above $5.
above $8.
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Blooms: Understand Difficulty: 02 Medium
LearningObjective: 17-04 Discuss how unions increase wage rates by pursuingthe demand-enhancement model, the craft union model, or the industrial union model.
Test Bank: I Topic: Three Union Models
Type: Graph
Minimum-wage legislation is less likely to have adverse effectson employment when the
A. affected labor market is monopsonistic.
economy has high unemployment.
derived demand for labor is shifting tothe left.
demand for labor is relatively elastic.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
Critics of minimum-wage legislation argue that it
A. keeps inefficient producers in business.
B. reducesemployment.
undermines incentives towork.
is deflationary.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
Many economists are critical of the minimum wage because they believe that it
A. hurts the efforts of labor unions.
B. reducesthe number of available job opportunities.
conflicts with policies designedto equalize the distribution of income.
causes labor shortages in affected markets.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
Unions might supporta higher minimumwage because
their constitutions obligate them to do so.
they feel a higher minimumwage will lower labor's tax payments for welfare programs.
C. a higher minimumwage makes less-skilled workers less substitutable for union workers.
D. the minimum wage is better targetedthan are alternative income-maintenance programs.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
Critics of theminimum wage arguethat as an antipoverty device, it is "poorly targeted." By this they mean that
A. the minimum wage only applies to a small percentageof the labor force.
B. many whobenefit from theminimum wage are teenagers or not poor.
the government has been unable to enforce the minimum wage.
the average level of wagesinthe economy is considerably higher than the minimum wage.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
If the minimumwage is set toohigh, in some labor markets we can expectto see
a shortageof labor.
an increase in on-the-job training.
C. a surplus of labor.
D. a decline in wage costs.
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Blooms: Understand Difficulty: 02 Medium
Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
According tosome supporters of the minimumwage, it has very small or even nonexistent negative employment effects because
A. the demandforminimum-wage labor is highly elastic.
B. it reduces turnover among minimum-wage workers,prompts employers tousethem more efficiently,and thus raises their average productivity.
it encourages teenagers tostay in school.
employers substitute lower fringe benefitsfor higher pay, keeping their compensation costs the same.
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Learning Objective: 17-06 Discuss how minimum wage laws affect labor markets.
Test Bank: I Topic: The Minimum-Wage Controversy
If all workers were homogeneous, all jobs were equally attractive to workers, and labor markets were perfectly competitive,
compensating differences would cause wage differentials.
noncompeting groups of workers would result in wage differentials.
C. all workers would receive the same wage rate.
D. worker mobility would occur such that wage differentials would widen.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Wage differentialsmayresult from all the followingexcept
differences in the nonmonetary aspects of variousoccupations.
differences in the educationand skills of workers.
geographic and sociological immobility of workers.
D. the tendency of qualified workers to move from lower pay jobs to higher pay jobs.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Suppose all workers are identicalbut working for Ajax is more pleasantthan working for Acme. In all other nonwage aspects, the two firmsoffer the same job characteristics. We would expect
A. wage rates at Ajax to be higher than at Acme.
B. wage rates at Ajax to be lower than at Acme.
wage rates at Ajax and Acme tobethe same.
workers at Ajax would have to be monitored more closelythan those at Acme.
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LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Noncompeting groups of workers are the result of
differences in the age-earnings profiles of workers.
differences in the "job tastes" of workers.
C. differencesinthe innate and acquired abilities of workers.
D. geographic immobility.
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LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Compensating differences in wages
A. compensate workersfor differences in their human capital.
B. reward workers differently based on differencesinthe desirability of jobs.
describe the tendencyfor the wages of all occupations toadjust to the medianlevel.
do not exist if jobs have different nonmonetary characteristics.
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LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Compensating differences in wages pay workersfor
A. differences in worker training and skills.
B. differencesinthe nonmonetary characteristics of jobs.
geographic immobility.
discrimination in hiring andfiring.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Which of the following factors is not relevant in explaining the persistence of wage differentials?
labor immobility
compensating differences
C. free public education
D. noncompeting groups
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
The idea ofcompensating differencesis used
by inclusive unions as an argument in bargaining for wage rate increases.
to justifythe application of minimumwages to low-wage labor markets.
to explain the divergence betweenwage rates and marginal resource cost.
D. to explain wage rate differences based on differing nonmonetary aspects of jobs.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
The concept of investment in human capitalindicates that
A. union workers arebetter educated and more productivethan nonunion workers.
B. expenditures on education can be explained in essentially thesame way as expenditures on machinery andequipment.
worker productivity correlates negatively with annual earnings.
the level of education is unrelatedto the level of one's income.
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LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Data on education andearnings reveal
negative age-earnings profiles for male workers.
no relationship between the two.
C. a positive relationship between the two.
D. a negativerelationship between the two.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
According toage-earnings data,
A. lower-educated workers have similar earnings at age 65 as higher-educated workers.
B. investments in educationresult in higher earnings.
high earnings are due tomotivation and innate ability,rather than education.
there is noclear relationship between education and worker productivity.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
The earnings of highlyeducated workers
A. rise more slowly than those of less-educated workers.
B. rise more rapidly than those of less-educated workers.
rise at about the same rate as those of less-educated workers.
stagnate earlier than do those of less-educated workers.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Economists regardexpenditures on education as investments because
they are subjectto tax deductionsat the same rate as are expenditures on machinery andequipment.
education is economically beneficial at the same time it is being acquired.
C. such expenditures are current costs that are intended toenhance future earnings.
D. they differ from expenditures on health andworker mobility.
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Blooms: Remember Difficulty: 01 Easy
LearningObjective: 17-07 List the major causes of wage differentials.
Test Bank: I Topic: Wage Differentials
Which of the following involves the creationof human capital?
A. The XYZ Corporation upgrades the machinery on its assembly line.
B. Jones receivesapprenticeship trainingas a carpenter.
Smith buys 30shares of common stock.