1. An organization the members of which belong to a particular profession is called

a. a craft union.
b. an industrial union.
c. a public employee union.
d. an employee association.
e. a trade association.

2. Which of the following statements about labor union membership in the United States is correct?

a. It covered about 6% of the labor force in 1910.
b. It doubled to about 12% of the labor force by 1920.
c. It peaked at about 25% of the labor force in the mid-1950s.
d. It was down to about 15% of the labor force in the mid-1990s.
e. All of the above statements are correct.

3. Typical objectives of labor unions include

a. the provision of employment for all union members.
b. the maximization of the total wage bill received by the union membership.
c. the maximization of the income of a limited number of union members, such as those with seniority.
d. any of the above.
e. none of the above.

4. In order to maximize the total wage bill received by its membership, a labor union must insist on a wage at which

a. the price elasticity of demand for this type of labor has an absolute value of 1.
b. the price elasticity of demand for this type of labor has an absolute value of >1.
c. the price elasticity of demand for this type of labor has an absolute value of <1.
d. the entire membership is employed, regardless of demand elasticity.
e. sharply limit the number of workers who are admitted to membership.

5. Which of the following statements about labor union practices is correct?

a. Unions try to increase the price elasticity of demand for union labor.
b. Unions try to increase the price elasticity of demand for the products of union labor.
c. Unions try to decrease the availability of substitutes for union labor.
d. Unions try to decrease the prices of substitute factors of production.
e. Unions try to increase the ratio of unskilled to skilled members within their ranks.

6. Labor unions always try to increase the demand for union labor because, ceteris paribus, this leads to higher wages and more union labor employed. Which of the following policies is designed to do just that?

a. Urging the public to "look for the union label" or to "buy American."
b. Restricting union membership by requiring entrance exams that are hard to pass.
c. Requiring long apprenticeship programs for various crafts.
d. Instituting closed shops (in the past) or union shops (more recently).
e. Advocating right-to-work laws.

7. Labor unions always try to decrease the supply of union labor because, ceteris paribus, this leads to higher wages. Which of the following policies is designed to do just that?

a. Setting up union shops, in which a worker is not required to be a union member to be hired, but must become a member within a certain period of time after being employed.
b. Advocating the restriction of imports of products that compete with union products.
c. Advocating higher minimum wages for the unskilled who potentially compete with skilled union labor.
d. Advocating the repatriation of illegal aliens and a reduction in legal immigration.
e. Resisting the introduction of labor-saving machinery.

8. A process whereby wage rates and other issues are determined by a union bargaining with management on behalf of all union members is known as collective bargaining. If such bargaining imposes a higher wage upon an otherwise competitive market, the effects include

a. a decrease in the quantity of labor demanded.
b. lower employment.
c. a lower overall wage bill if the price elasticity of demand had an absolute value >1.
d. the appearance of unemployment.
e. all of the above.

9. Consider Figure 27.1. It provides relevant information for a single buyer or monopsony in the labor market. Assume that the firm faces the competitive labor supply shown, is a competitive seller in its product market, and wants to maximize profit. Under the circumstances, which of the following statements is correct?

a. The firm would not hire labor quantity 0T because, if it did, its marginal factor cost, MFC, would exceed product price, P, times marginal physical product, MPP, which, in turn, would enable the firm to raise profit by hiring less labor.
b. The firm would not hire labor quantity 0H because, if it did, its product price, P, would exceed the ratio of MFC/MPP, which, in turn, would enable the firm to raise profit by hiring more labor.
c. Both (a) and (b).
d. We have no information here about the firm's product price; therefore, none of the preceding statements makes any sense.
e. We have no information here about labor's marginal physical product; therefore, none of the preceding statements makes any sense.

10. Consider Figure 27.1. It provides relevant information for a monopsony in the labor market, which initially faces the competitive labor supply shown. This single buyer in the labor market would maximize profit by

a. employing labor quantity 0K, in accordance with the MRP and MFC intersection I.
b. paying a wage of 0B, in accordance with the MRP and MFC intersection I.
c. incurring a total wage bill of 0BIK.
d. letting IU workers be unemployed.
e. doing all of the above.

11. Consider Figure 27.1. It provides relevant information for a monopsony in the labor market, which initially faces the competitive labor supply shown. If a labor union is now formed and, by threat of strike, insists on a minimum wage of 0C,

a. the labor supply line effectively becomes line CQU and beyond.
b. the marginal factor cost line, at least for labor quantities between 0 and R, effectively becomes line CQ.
c. the firm will maximize profit by hiring 0M workers, which is more than it would hire in the absence of the union.
d. the firm will incur a total wage bill of 0CLM, which is more than the amount it would pay for labor in the absence of the union.
e. all of the above will occur.

12. Consider Figure 27.1. It provides relevant information for a monopsony in the labor market, which initially faces the competitive labor supply shown. If a labor union is now formed and, by threat of strike, insists on a minimum wage of 0B,

a. the labor supply effectively becomes line BIS and beyond.
b. the marginal factor cost line, at least for labor quantities between 0 and V, effectively becomes line BU.
c. the firm will maximize profit by hiring 0V workers, which is more than it would hire in the absence of the union.
d. the firm will incur a total wage bill of 0BUV, which is more than the amount it would pay for labor in the absence of the union.
e. all of the above will occur.

13. Consider Figure 27.1. It provides relevant information for a monopsony in the labor market, which initially faces the competitive labor supply shown. If a labor union is now formed and, by threat of strike, insists on a minimum wage of 0A,

a. the labor supply effectively becomes line AS and beyond, along the upward-sloping blue MFC line.
b. the marginal factor cost line, at least for all labor quantities shown in this graph, effectively becomes the green horizontal line AS and beyond.
c. the firm will maximize profit by hiring 0T workers, which is more than it would hire in the absence of the union.
d. the firm will incur a total wage bill of 0AST, which is more than the amount it would pay for labor in the absence of the union.
e. all of the above will occur.

14. Consider Figure 27.1. It provides relevant information for a monopsony in the labor market, which initially faces the competitive labor supply shown. If a labor union is now formed and, by threat of strike, raises the wage above the initial level of 0E,

a. there will be unemployment of LQ, if the wage is raised to 0C.
b. there will be unemployment of IU, if the wage is raised to 0B.
c. there will be unemployment of GS, if the wage is raised to 0A.
d. there will be no unemployment, regardless of the extent of the wage hike.
e. either (a) or (b) may occur, but the other statements are wrong.

Table 27.1

Number of Workers (1)	Wage Rate (2)	Total Wage Bill (3)	Marginal Factor Cost (4)
0	$5.00		--
5	5.50
10	6.00
15	6.50
20		$140.00

15. Consider Table 27.1. It contains relevant information about the labor supply available to a monopsony. Which of the following statements about this firm is correct?

a. The missing entry in column (2) equals $7.00.
b. The missing entries in column (3) are $0, 27.50, 60.00, 97.50.
c. The missing entries in column (4) are $27.50, 32.50, 37.50, 42.50.
d. All of the above statements are correct.
e. Only (a) and (b) are correct.

16. Which of the following statements correctly characterizes the effects of labor unions in the United States?

a. During the 1920-1979 period, the average wage of union members was 10-15% higher than that of comparable nonunion labor.
b. In 1995, union workers in such sectors as construction, finance/insurance/real estate, manufacturing, mining, services, and wholesale/retail trade, enjoyed median weekly earnings about a third higher than nonunion workers.
c. On theoretical grounds alone, one would expect to find the union/nonunion wage differentials noted above, because unions bargain for higher wages and possibly reduce employment in their sectors, while the displaced workers move into nonunion sectors, where they swell the labor supply and reduce wages.
d. All of the above.
e. Only (a) and (b).

17. Which of the following statements correctly characterizes the effects of labor unions in the United States?

a. They have helped create a union/nonunion wage differential.
b. The wages of union employees have risen relative to the wages of nonunion employees.
c. They have obtained higher wages for their members at the expense of other workers rather than at the expense of the owners of firms.
d. All of the above.
e. None of the above.

18. Which of the following statements correctly characterizes the effects of labor unions in the United States?

a. The higher wages that union employees receive through unionization clearly outweigh the lower wages that nonunion employees receive a result of union activity, and this is evidenced by the fact that the percentage of national income going to (union plus nonunion) labor has steadily risen over time.
b. The higher wages that union employees receive through unionization just about match the lower wages that nonunion employees receive a result of union activity, and this is evidenced by the fact that the percentage of national income going to (union plus nonunion) labor has not changed over time.
c. The higher wages that union employees receive through unionization fail to match the lower wages that nonunion employees receive a result of union activity, and this is evidenced by the fact that the percentage of national income going to (union plus nonunion) labor has fallen over time.
d. The percentage of national income going to labor as a whole has fallen during times when labor unions were weak and risen when they were strong.
e. Ironically, the percentage of national income going to labor as a whole has risen during times when labor unions were weak and fallen when they were strong.

19. Picture a perfectly competitive industry in long-run equilibrium. If a union organized workers and successfully bargained for higher wages, what would be some of the effects?

a. In the short run, positive economic profit would be reduced, possibly to zero.
b. In the short run, zero economic profit would turn negative and the typical firm would produce less.
c. In the short run, firms would neither leave nor enter the industry.
d. In the long run, industry supply and price would be unchanged.
e. In the long run, higher wages would have come out of profits.

20. Which of the following statements correctly characterizes the effects of labor unions in the United States?

a. Ceteris paribus, by raising wages in unionized sectors, they tend to raise prices for the products of union labor.
b. Ceteris paribus, by indirectly lowering wages in nonunionized sectors, they tend to lower prices for the products of nonunion labor.
c. Both (a) and (b).
d. By driving an artificial wedge between the wages of comparable workers in unionized and nonunionized sectors, unions contribute to a misallocation of labor: the value of output could be raised by moving labor from the union sector (where the MRP is low) to the nonunion sector (where the MRP is high).
e. All the evidence speaks with one voice: Labor unions lower the productivity of workers.