Suppose a Study Finds That Union Wages Are 10% Higher

question 8

Multiple Choice

Suppose a study finds that union wages are 10% higher than nonunion wages.This will likely overstate the true advantage of working in the union job when

• A) the nonunion job has better skilled workers.
• B) the union job has poorer working conditions.
• C) workers losing union jobs seek out non-union jobs.
• D) unemployment is high.

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Definitions:

Initial Endowment

The initial quantity of goods, services, and assets that an individual, organization, or economy possesses.

Pareto Optimal

An allocation of resources from which it is impossible to reallocate without making at least one individual worse off.

Utility Function

A mathematical representation that captures the level of satisfaction or happiness that consumers derive from consuming goods and services.

Initial Endowment

The original distribution of resources, wealth, or abilities that individuals or groups possess in an economic model.