Unions might increase efficiency in the case where they
A) Raise the wage for insiders above the competitive equilibrium.
B) Lower the wage of local outsiders.
C) Offset the market power of a large firm that is the dominant employer in a region.
D) Threaten a strike but don't actually follow through so there are no lost hours of work.

Question

Quizplus · Accepted Answer

Unions can be beneficial in the case where they balance out the market power of a large employer in a region, preventing the employer from exploiting their market dominance to drive down wages and working conditions. However, if unions simply increase wages for insiders above the competitive equilibrium, this can lead to inefficiencies and potential job losses. Lowering the wage of local outsiders through union bargaining would likely face legal challenge and is not a typical goal of a union. Threatening a strike without follow-through would have limited impact on efficiency.

Unions Might Increase Efficiency in the Case Where They