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The Union Representing the Bread Makers at the Hostess Bread

question 379

Multiple Choice

The union representing the bread makers at the Hostess Bread Company went on strike and demanded higher wages than what the firm wanted to pay. I. If the firm is in a competitive labor market the union can only raise wages by decreasing employment.
II) If the firm is a monopsony in the labor market the union can only raise wages by decreasing employment.
III) If the firm is a monopsony in the labor market the union can both raise wages and increase employment.


Definitions:

Law of Diminishing Returns

An economic principle stating that as one input in the production process is incrementally increased, holding all other inputs constant, there will be a point at which the added output from each additional unit of input will start to decrease.

Dollars Per Unit

A unit cost measure representing the price or cost of a single item or measure of goods or services.

Elasticity of Product Demand

A measure of the responsiveness of the quantity demanded of a product to changes in its price.

Elasticity of Resource Demand

The measure of how much the quantity demanded of a resource changes in response to a change in its price.

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