Economists Observe Clear Evidence of a Union Wage Premium but Do

question 37

Multiple Choice

Economists observe clear evidence of a union wage premium but do not observe the clear union effect on employment levels predicted from theory.One explanation for this is

• A)that the labour supply curve shifts to the right in the collective bargaining process,thereby eliminating any employment effect.
• B)that the labour supply curve,in the presence of a union,is very inelastic,which implies only a very small effect on employment.
• C)that union-based advertising for the product increases demand for the product,shifts the demand curve to the right and eliminates any employment effect.
• D)the union's ability,through the collective bargaining process,to pressure firms to hire more workers than they otherwise would at the union wage.
• E)both C and D are correct.

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