Economics Study Set 18

Business

Quiz 38 :
Do Labor Unions Increase the Wages of Workers

Quiz 38 :
Do Labor Unions Increase the Wages of Workers

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Suppose that Florida's migrant workers are effectively unionized. What will be the effect of the unionization on (a) the price of Florida oranges? (b) the profits of Florida fruit growers in the short run and in the long run? (c) the mechanization of the fruit-picking industry? (d) the employment of migrant farm workers?
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The low student performance in primary and secondary school levels in spite of high spending on education is a matter of concern for US policymakers. The average student performance has deceased in past forty years. Some policymakers argue that uncontested monopoly of public schools is the reason for this poor performance and high cost.
During 1970-2005, the educational spending increased steadily in US. For the last three and a half decades, the average spending per student in public elementary and secondary school has more than doubled. The spending of US is much higher than other OECD countries. On the other hand, in spite of this higher spending the students' performance remains low in US. The Achievement scores of the high school graduate students fell in 1970s and started to increase slowly from 1990s, but it still remains lower than the 40 years previous score. Also the science achievement scores of fifteen years old US student is lower than the cross country average. Hence, we see that higher spending on education does not necessarily imply higher student performance.

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Assume that the primary objective of a union is to raise the wages of its members. a. Discuss the conditions that will help the union achieve this objective. b. Why might a union be unable to meet its goal?
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The low student performance in primary and secondary school levels in spite of high spending on education is a matter of concern for US policymakers. The average student performance has decreased in past forty. Some policymakers argue that uncontested monopoly of public schools is the reason for this poor performance and high cost.
For efficient allocation of resources and better operation of markets, it is necessary for consumer to economize their behavior and competition among suppliers. For that it is necessary to consumer directly pay for the goods and service and profit seeking firms to operate in the market. This is because each firm will seek to maximize its profit by keeping prices low and providing the best service possible and the consumer will search for low cost producers. Both of this behavior will drive inefficient producers out of the market and ensures efficient allocation of resources.
The state public schools have substantial monopoly power and are subjected to huge subsidies. The school authorities even use lobby to attract more subsidies. The education in these schools is free and thus faces no competition from its competitors i.e. the nonpublic schools. Those wanting to join private school have to incur huge costs as these are not subsidized. Thus, as the schools lack competition from its rivals it has no incentive to innovate new ways to provide better education for its students. Lack of competition and limited choice available to the students thus deteriorates the quality of education.

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"If a union is unable to organize all the major firms in an industry, it is unlikely to exert a major effect on the wages of union members." Indicate why you either agree or disagree.
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The parents should be free to choose among the schools to send their children to as this will give rise to the competition among schools. The revenue of the school then will depend on the ability of the school to attract people. The school will then innovate new ways to provide better education to its students and the demand for bad teachers will decline. This rise in competition will therefore ensure efficient allocation of resources in the sector.

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Evaluate the following statements. a. "An increase in the price of steel will be passed along to consumers in the form of higher prices for automobiles, homes, appliances, and other products made with steel." Do you agree or disagree? b. "An increase in the price of craft union labor will be passed along to consumers in the form of higher prices of homes, repair and installation services, appliances, and other products that require craft union labor." Do you agree or disagree? c. Are the interests of labor unions in conflict primarily with the interests of union employers? Explain.
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"Unions provide the only protection available to working men and women. Without unions, employers would be able to pay workers whatever they wanted." True or false?
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