Question

In: Economics

Which of the following statement(s) is (are) true? I. A labor union can choose to maximize...

Which of the following statement(s) is (are) true?

I. A labor union can choose to maximize profit, maximize total wages of its members, or accept the competitive wage.

II. The number of workers employed when a union is present is generally greater than the number employed in a perfectly competitive labor market.

III. The wage rate paid to union workers typically exceeds that of workers in a competitive market.

A) I, II, and III

B) III

C) I and III

D) II and III

**The answer is either B or C, I just need to know why and how.**

Solutions

Expert Solution

Answer - Option B

The wage rate paid to the union workers typically exceeds that of workers in the competitive market.

This is because the unions aim to earn the maximum profits. They take the wages above the equlibrium competitive rate. This is done by either decreasing the supply or increasing the damand. The formation of the unions leads to lesser producer profits. They dont charge the competitive price. Thus 1 st and second statement are not true.


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