1. The allocative efficiency loss implied by the diagram is a static, short-run loss. Compared to the static loss, the dynamic, long-run loss is probably:

a. greater, because unions reduce firm profitability and thereby inhibit investment

b. greater, because unemployment is greater in the long run

c. greater, as firms have a greater opportunity to exercise their monopsony power

d. smaller, because the decline in nonunion wages increases the extent of poverty

2. Evidence suggests that unions reduce firm profitability and discourage investment, so that:

a. the dynamic efficiency loss from unionization is smaller than the static efficiency loss

b. the dynamic efficiency loss from unionization is greater than the static efficiency loss

c. turnover in union firms is greater because workers become bored with old technology

d. turnover in nonunion firms is greater because workers cannot keep up with new technology

3. In industry A, all displaced workers remain in the union sector waiting to be recalled. In industry B, all displaced workers seek work in the nonunion sector. All else constant, the:

a. allocative efficiency loss is greater in industry A

b. allocative efficiency loss is greater in industry B

c. allocative efficiency loss is the same in A and B

d. dynamic efficiency loss is greater in industry A

4. All of the following suggest that unions may improve productivity and efficiency except:

a. unions provide workers a voice with which to communicate to management

b. union wage pressure may force management to adopt more efficient techniques to maintain profitability

c. union workers protected by seniority rules are more likely to pass on knowledge to new workers

d. unionization increases turnover rates, bringing in new workers with fresh ideas

5. Regarding unions and productivity, empirical results show that:

a. the impact of unionization on productivity is not clear cut

b. unionization reduces productivity generally

c. unionization improves productivity generally

d. unionization improves productivity most in industries where union and management are most adversarial

6. Which of the following statements is supported by empirical evidence?

a. Lower productivity growth for unionized firms is primarily due to these firms being in industries with slow productivity growth

b. The negative impact of unions on productivity is greatest in industries that are most competitive

c. The positive impact of unions on productivity is greatest in industries where the union wage advantage is smallest

d. Unions indirectly improve productivity growth by increasing the rate of investment in physical capital

7. Empirical estimates generally show that unions reduce:

a. both firm profitability and economic efficiency

b. firm profitability but improve economic efficiency

c. firm profitability but there is no consensus regarding their effects on economic efficiency

d. economic efficiency but there is no consensus regarding their effects on firm profitability

8. Evidence indicates that, on balance, union wage policies tend to:

a. lead to greater overall inequality in the distribution of earnings

b. assign wages to individual workers, whereas nonunion firms tend to assign wages to jobs

c. decrease the wage gap between unskilled and skilled workers by seeking equal absolute wage increases for all workers rather than equal relative wage increases

d. raise wage rates at only the largest firms in an industry, thereby increasing wage dispersion within the industry

9. There is a general consensus among economists that:

a. unions reduce unemployment

b. unions increase unemployment

c. unions have increased labor’s share of national income

d. union wage determination is not a serious cause of inflation in the United States

10. Overall, unions have generally:

a. increased labor’s share by increasing the productivity of labor

b. reduced labor’s share by reducing the wages of nonunion labor

c. reduced labor’s share by raising prices to consumers

d. had a negligible effect on labor’s share