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Economics
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31 Oct 2020

10. If union workers’ higher wages are matched by higher productivity. If so, then the firm can afford to pay the higher union wages and, 

a. the demand curve for “unionized” labor could actually shift to the right.

b. the demand curve for “unionized” labor could actually shift to the left.

c. the demand curve for “unionized” labor remains the same.

d. none of the above

Booster class
Microeconomics
Skill
Explaining the concept of Labor union
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Raushan Raj
Raushan RajLv8
31 Oct 2020

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Related questions

There are two sectors of the construction industry that currently pay their employees the market-clearing wage. The demand for labor in each sector is w = 18 - Ed, where Ed = the number (in thousands) of workers. The supply of labor in each sector is Es = w - 2, where w = the wage rate (dollars per hour). A union organizes in one of the sectors, and it restricts supply to that sector by insisting that only those in the union are hired by firms in that sector (and it is difficult to get into the union). When the employees in this sector unionize, the supply of labor in that sector changes to Es = w - 4.

a) What is the wage rate in both sectors before unionization? How many employees will be hired in each sector?

b) What is the wage rate in the unionized sector? How many employees will be hired in the unionized sector?

c) If the unemployed workers in the newly unionized sector spill over into the non-union sector, what will be the wage rate in the non-union sector? How many employees will be hired in that sector?

There are two sectors of the construction industry that currently pay their employees the market-clearing wage. The demand for labor in each sector is w = 18 – Ed, where Ed = the number (in thousands) of workers. The supply of labor in each sector is Es = w – 2, where w = the wage rate (dollars per hour). A union organizes in one of the sectors, and it restricts supply to that sector by insisting that only those in the union are hired by firms in that sector (and it is difficult to get into the union). When the employees in this sector unionize, the supply of labor in that sector changes to Es = w – 4.

a) What is the wage rate in both sectors before unionization? How many employees will be hired in each sector?

b) What is the wage rate in the unionized sector? How many employees will be hired in the unionized sector?

c) If the unemployed workers in the newly unionized sector spill over into the nonunion sector, what will be the wage rate in the nonunion sector? How many employees will be hired in that sector?

d) What is the union relative wage advantage (union-wage/nonunion wage)? What is the true absolute effect (union-wage/equilibrium wage in the absence of a union)?

e) Suppose the employees in the non-unionized sector want a union to represent them as well. In an attempt to discourage a union from forming in this sector, the employers in that sector offer a wage rate of $10.50. How many nonunion workers will be hired? What is the union relative wage advantage?

that this marginal cost arises because each roll of film requires 1 hour of unskilled labor to produce, and the market wage for unskilled labor is $4 per hour. Suppose that this market wage is unaffected by whatever happens in the film industry, and that workers can easily find a job in the other industries at that wage.
(a) If Kodak simply pays its workers their opportunity wage of $4 per hour, then do Kodak workers benefit from, lose from, or remain indifferent to the opening of trade in the film industry?
(b) Now, suppose that Kodak workers are unionized, so that in addition to receiving their opportunity wage they bargain to receive a fraction of the economic rents the company generates. Assume for simplicity that the existence of the union does not affect the firm's output and pricing decisions.5 Will your answer to the question in (a) be different?
(c) Consider the political incentives of Kodak workers to support or oppose free trade in film. Will those political incentives be more closely aligned with the political incentives of management if the workers are unionized or if they are not unionized? Explain.

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