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As a cartel, a labor union faces a trade-off between wages and employment. A higher wage rate will generally mean fewer union members employed. Given the trade-off between wages and employment, all unions will tend to have certain goals. One goal will be to reduce the elasticity of demand for union labor. This goal can be achieved by reducing the availability of substitute factors and by reducing the availability of substitute products. A second union goal will be to increase the demand for union labor. This goal can be achieved by; (1) increasing product demand, (2) increasing the MPP of union workers, and (3) increasing the prices of substitute factors. A third union goal will be to decrease the supply of union labor. The ideal situation to allow a union to control the supply of labor is a closed shop agreement, which requires union membership as a condition for employment. Closed shop agreements were made illegal by the Taft-Hartley Act. Most states permit union shop agreements, which require employees to join the union within a specified time. The Taft-Hartley Act gave states the power to pass right-to-work laws, which prohibit union shop agreements. Unions can directly affect wage rates through collective bargaining. Collective bargaining is where a union bargains with management on behalf of the workers. A union might use the threat of a strike to negotiate a wage rate above equilibrium. Collective bargaining will generally result in higher wages and fewer workers employed. A monopsony is a lone buyer in a factor market. A monopsony faces an upward sloping labor supply curve, and a twice as steeply upward sloping marginal factor cost curve. A monopsony will employ workers where marginal revenue product equals marginal factor cost, which will be a lesser quantity of workers at a lower wage compared to a perfectly competitive employer. A union negotiating with a monopsony may be able to obtain both a higher wage and a greater quantity of labor employed. Research indicates that unions increase the wages of union employees, but decrease the wages of nonunion employees. Higher union wages will also result in higher prices for union made products (or higher taxes for union-produced government services). The traditional view holds that unions hurt productivity due to; (1) strikes, (2) unnecessary staffing requirements, and (3) keeping willing employers and employees apart. An alternative view is that unions increase productivity by; (1) providing union workers with a collective voice, and (2) attracting higher quality workers. Questions for Chapter 25 Fill-in-the-blanks: 1. A ____________________ ____________________ agreement requires union membership as a condition for employment. 2. A ____________________ ____________________ agreement requires employees to join the union within a specified time. 3. Right-to-work laws prohibit ____________________ shops. 4. ____________________ bargaining is where a union bargains with management on behalf of the workers. 5. ____________________ is a lone buyer in a factor market. FOR REVIEW ONLY - NOT FOR DISTRIBUTION 25 - 11 Labor Unions
Multiple Choice: ___ 1. A union of plumbers is what type of union? a. craft union b. industrial union c. public employee union d. None of the above ___ 2. Unionization rates: a. are about the same for private sector and public sector employees b. are three times higher for private sector employees than for public sector employees c. are over five times higher for public sector employees than for private sector employees d. None of the above ___ 3. If a union negotiates a higher wage rate: a. generally, the number of union members employed will be unaffected b. generally, fewer union members will be employed c. generally, more union members will be employed ___ 4. One of the three union goals is: a. reduce the elasticity of demand for union labor b. reduce the demand for union labor c. increase the supply of union labor d. Both a. and c. above ___ 5. If a union reduces the elasticity of demand for union labor: a. the union will lose fewer jobs with any wage increase b. the union will have more bargaining power c. Both of the above d. Neither of the above ___ 6. Labor unions would generally support legislation to: a. restrict imports b. restrict immigration c. increase the minimum wage d. All of the above ___ 7. A union shop agreement: a. requires union membership as a condition for employment b. requires employees to join the union within a specified time c. increases the union’s bargaining power d. Both b. and c. above ___ 8. The Taft-Hartley Act: a. prohibited closed shops b. prohibited union shops c. required all states to enact right-to-work laws d. All of the above ___ 9. In open shops: a. workers may choose to join the union or may choose to not join the union b. workers who choose to not join the union are still covered by the collective bargaining agreement c. unions have less bargaining power d. All of the above FOR REVIEW ONLY - NOT FOR DISTRIBUTION Labor Unions 25 - 12
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PRINCIPLES OF ECONOMICS JEFF HOLT S
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Principles of Economics, 6th Editio
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16. Study Guide for Chapter 7 17. C
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11. Appendix: Book Review - “The
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20. Appendix: The NCAA Cartel 21. S
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Introduction: A Brief History of U.
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In the twentieth century, per capit
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Appendix: The 35 Largest National E
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Multiple Choice: ___ 1. The Jamesto
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2. Describe the economic cost of th
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Chapter 1 Scarcity and Choices The
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Example 5B: At the end of 1982, the
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Example 11: When Cindy quits her jo
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consequences may result in failure
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An upward sloping curve (as in Exam
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In making decisions, humans tend to
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5. ______________________ _________
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___ 13. If the value of one variabl
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Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
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Chapter 2 Trade and Economic System
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Example 4B: The following quantitie
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1. An increase in the quantity of r
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3. For whom to produce? This is det
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The graph below illustrates the shi
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The two primary economic systems ar
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___ 12. The capitalist vision sees
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___ 25. According to the book “Ca
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Chapter 3 Demand, Supply, and Equil
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. For inferior goods, income and de
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The same information can be placed
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Not only does a free market elimina
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$7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3
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Example 17: The graph below illustr
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Questions for Chapter 3 Fill-in-the
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___ 12. Assuming a market originall
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$8 - 7 - 6 - 5 - Price 4 - 3 - 2 -
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Chapter 4 Inflation and Unemploymen
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Computing the Rate of Inflation The
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Full Employment Though unemployment
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3. Cyclical unemployment - due to d
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During the Great Depression, the ec
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Appendix: Think Like an Economist -
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Answer questions 8. and 9. based on
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___ 25. The extension of unemployme
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Chapter 5 Measuring Total Output: G
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5. Leisure. Leisure time is by defi
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The U.S. is a high per capita GDP c
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Example 17: In “An International
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The simple circular flow diagram be
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___ 3. Which of the following would
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2. Explain what nonproduction trans
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Chapter 6 The Aggregate Market The
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Example 2C: Assume the same facts a
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Example 5B: The price of crude oil
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Price Level Real GDP SRAS AD 2 AD 1
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Appendix: Why the Aggregate Demand
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___ 3. DEF Company can invest in ne
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2. List and explain the two factors
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Chapter 7 Classical Economic Theory
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Notice that the investment demand c
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Long-Run Equilibrium If Real GDP is
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Example 6B: When the economy is in
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Laissez-faire If the economy is sel
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___ 5. According to Say’s Law: a.
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3. On the graph below, draw an aggr
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Chapter 8 Keynesian Economic Theory
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Example 2B: The graph below illustr
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Example 5: Assume that the table be
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Notice on the graph on the previous
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According to Keynesian theory, a ch
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“The General Theory” also inclu
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___ 8. If the consumption function
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3. If the MPC is .667, and investme
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Chapter 9 Fiscal Policy The basic e
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Keynesian Fiscal Policy Theory and
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Example 5A: The federal government
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The Laffer Curve What will happen t
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Appendix: The Importance of Incenti
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___ 4. A decrease in government exp
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2. Explain what automatic stabilize
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Chapter 10 Money, Money Creation, a
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Example 4B: The castaways on Gillig
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Looking at the balance sheet below,
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Demand-side One-shot Inflation Exam
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4. Inflation increases uncertainty
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life; it came into existence not by
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calculated by using the potential d
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___ 12. If the required-reserve rat
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4. Referring to the balance sheet f
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Chapter 11 The Federal Reserve Syst
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5. After Bank X sells the $300,000
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Low Mortgage Interest Rates Mortgag
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Relaxed Standards for Mortgage Loan
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The Bursting of the Housing Bubble
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On February 17, 2009, the federal g
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Fed policies caused short-term inte
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___ 10. The Fed’s most important
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___ 25. In response to the recessio
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Chapter 12 Monetary Policy The basi
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2. A change in aggregate demand (AD
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Monetarist Transmission Mechanism C
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3. Borrowers do not have to seek ou
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Appendix: Book Review - “The Age
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Questions for Chapter 12 Fill-in-th
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___ 16. The primary source of incom
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7. According to Alan Greenspan, wha
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Chapter 13 Taxes, Deficits, and the
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Example 5: In 2015, Taxpayer A had
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of $5 and a quantity of 10 units. T
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The complexity of the tax law also
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the current government spending and
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cut of 1964. The top rate was lower
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___ 6. Federal excise taxes: a. are
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3. How would eliminating the loopho
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Chapter 14 Economic Growth The basi
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2. Labor. Labor can contribute to e
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estricting international trade (e.g
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An improvement in technology (e.g.
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The table below shows the economic
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will increase both Real GDP and per
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___ 8. Which of the following is co
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___ 26. The opinion that economic g
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Chapter 15 Less Developed Countries
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Example 8: Countries A, B, C, and D
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Obstacles to Economic Development f
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c. Restrictions on international tr
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Appendix: Book Review - “The Powe
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Example 25: In Brazil, about half t
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Study Guide for Chapter 15 Chapter
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___ 13. Among the counterproductive
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4. List four ways that governments
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Chapter 16 International Trade The
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Other Benefits of Free Internationa
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Example 6: The graph below illustra
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competitive disadvantage. But dumpi
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is only 25% as productive as before
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Smith was skeptical of government a
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___ 4. For Country X, what is the o
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___ 18. Frédéric Bastiat’s “P
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4. On the graph below: (1) What is
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Chapter 17 Elasticity We are often
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Example 4A: What is price elasticit
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Example 5A: Gertie’s Gas and Go i
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Example 10A: When the price of Good
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Example 13B: On the graph below, su
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$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
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In the long run, would the deadweig
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___ 7. The factors that determine w
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3. a. Which price (or prices) from
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Chapter 18 Utility The basic econom
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Nonetheless, society generally assu
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Example 9: Capital City operates a
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Marginal rate of substitution - the
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The diamond-water paradox is the ob
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Complete the table below to answer
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4. The graph below shows indifferen
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Chapter 19 The Firm The basic econo
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than contributing to team productio
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1. Difficulty in raising large amou
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Corporations also use self-financin
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Example 24: A blacksmith who produc
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For financing needs, proprietorship
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___ 13. Corporations: a. are comple
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5. List two things that the absence
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Chapter 20 Production and Costs The
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In Example 5B, Birdwell finds that
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variable cost initially decreases,
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Quantity TC MC AFC AVC ATC 0 240 X
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If the scale of operation is increa
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average total cost. Average fixed c
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___ 11. Concerning the cost curves:
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5. Complete the following cost tabl
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Chapter 21 Perfect Competition The
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Even though a perfect competitor ca
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Example 6C: This example builds on
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At what price will there be neither
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Appendix: Perfect Competition in th
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Multiple Choice: ___ 1. A perfect c
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___ 17. Perfect competition: a. req
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Answers for Chapter 21 Fill-in-the-
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Chapter 22 Monopoly Of the four mar
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3. Exclusive ownership of an essent
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maximizing quantity (4 units) creat
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$22 - 20 - 18 - 16 - 14 - Deadweigh
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Page 378 and 379: Chapter 23 Monopolistic Competition
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Page 384 and 385: Example 9: The Organization of the
Page 386 and 387: Example 12 illustrates the dilemma
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Page 390 and 391: ___ 14. Game theory: a. is a method
Page 392 and 393: Answers for Chapter 23 Fill-in-the-
Page 394 and 395: Chapter 24 Factor Markets The basic
Page 396 and 397: $ $240 - 200 - 160 - 120 - 80 - 40
Page 398 and 399: Since producers will attempt to equ
Page 400 and 401: 2. Differences in nonmoney aspects
Page 402 and 403: were his strikeouts, walks, and hom
Page 404 and 405: ___ 3. To maximize profits, a produ
Page 406 and 407: ___ 19. According to the book, “M
Page 408 and 409: Multiple Choice: 1. a. 8. c. 15. d.
Page 410 and 411: Chapter 25 Labor Unions The primary
Page 412 and 413: The elasticity of demand for union
Page 414 and 415: Example 4A: Assume that the graph b
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Page 418 and 419: Wage Factory A Quantity of Labor S
Page 422 and 423: ___ 10. For a monopsony: a. there i
Page 424 and 425: 3. The graph below represents a lab
Page 426 and 427: Chapter 26 Interest, Present Value,
Page 428 and 429: An increase in expected rates of re
Page 430 and 431: An asset is valuable because we exp
Page 432 and 433: Example 13B: General Ordnance prove
Page 434 and 435: Appendix: Present Value Table One f
Page 436 and 437: ___ 4. An increase in expected rate
Page 438 and 439: Problems: 1. List and explain the t
Page 440 and 441: Chapter 27 Market Failure The basic
Page 442 and 443: External Benefit If a market genera
Page 444 and 445: Example 2: To encourage the consump
Page 446 and 447: $100 - 90 - 80 - MSC 70 - $ 60 - 50
Page 448 and 449: A common good is nonexcludable. Non
Page 450 and 451: Study Guide for Chapter 27 Chapter
Page 452 and 453: ___ 5. What government policy would
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Page 456 and 457: Chapter 28 Public Choice and Govern
Page 458 and 459: Candidates and the Median Voter Mod
Page 460 and 461: Example 8: According to State and F
Page 462 and 463: Example 10: When Elvis Presley was
Page 464 and 465: 4. Pessimistic bias. This is the te
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Page 468 and 469: 2. If a certain policy will yield s
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Chapter 29 Government Regulation of
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underproduction is the amount that
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micromanagement results in business
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market. They may agree with their c
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Questions for Chapter 29 Fill-in-th
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___ 10. The public interest theory
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4. List the four types of costs imp
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Chapter 30 Agriculture and Health C
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weather may cause bumper crops. Bad
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Security and Rural Investment Act o
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Example 12: From 1960 to 2013, the
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1. NHI would provide universal heal
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d. Insurance providers are not allo
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Study Guide for Chapter 30 Chapter
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Answer questions 7. through 10. by
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___ 21. If there were no individual
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Chapter 31 Income Distribution and
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Income is more equally distributed
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over a typical career is the accumu
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Ideal Income Redistribution The ide
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Poverty - a family whose income fal
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Appendix: Income Inequality around
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How is this story an analogy for th
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___ 2. In 2013, the Lowest Income 6
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Problems: 1. Explain the two primar
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Absolute advantage - when one natio
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Fiat money - money by government de
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Nonrivalrous good - a good for whic
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Absolute advantage, 16-9 Absolute e
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“Company town”, 25-6 Comparativ
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Eli Lilly and Company, 22-1 Emergen
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Houston, Texas, 15-10 Human capital
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Market, 3-1, 3-8-9 Market basket, 4
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Political bias, 9-4, 12-7 Political
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Short run production, 20-2-3 Short-
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Upturns, 9-4 USDA, 27-9, 30-1-2, 30
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