Question

Question 25 (1 point)

The Competitive firm's demand curve for labor is equal to:

Question 25 options:

	a. The marginal product for labor curve.
	b. The firm's 'value of marginal product' (VMP) curve.
	c. The marginal cost of hiring labor curve.
	d. The marginal revenue curve.

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Question 26 (1 point)

The best example of a monopsonist is:

Question 26 options:

	a. AT&T
	b. Ford Motor Company
	c. the Teamsters' Union
	d. a large army post located in a small community/town.

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Question 27 (1 point)

Suppose a powerful labor union negotiates a wage for its members above the equilibrium wage rate in a previously nonunionized competitive labor market. A likely result of this is that:

Question 27 options:

	a. the union will face difficulties in recruiting new members.
	b. union members will be able to work more overtime than before.
	c. each firm will make up for higher wage rate by expanding output.
	d. the level of employment will be lower at the new wage rate. Question 29 (1 point) The levels of employment tend to be lower in unionized industries. Question 29 options: True False

Answer 1

Question 25. When we talk about a competitive firm's decision of hiring labor, it generally hires labor upto the point where the value of marginal product of labor equals the current wage rate. Hence the demand curve for its labor is essentially the marginal product of labor if real wage is used and is equal to the value of marginal product' (VMP) curve for nominal wage. Option B is correct

Question 26 The best example of a monopsonist is the one that is a buyer of a particular services. Most of the unions are monopsonists as they are the group of workers and employers act as sellers. The examples include the Teamsters' Union. Option C is correct.

Question 27 If there is a powerful labor union and it is able to negotiates a higher than market wage for its members in case when the market was a previously nonunionized one for the labor, we expect a higher wage rate to create unemployment and so the level of employment will be lower at the new wage rate. Option D iscorrect

Question 29 The levels of employment tend to be lower in unionized industries. True. This is because of the above mentioned reason. Higher wages are the result of unionization and so there is typically unemployment.