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 offset the market power of a large firm that is the dominant employer in a region by negotiating higher wages and better working conditions for their members. This can result in increased efficiency as it can lead to higher morale, lower turnover, and increased productivity. Additionally, unions can help to balance the power dynamic between employers and employees, leading to more equitable outcomes for all. A is incorrect because raising the wage for insiders above the competitive equilibrium can lead to inefficiencies such as higher labor costs for employers which can lead to reduced profitability, and the potential for unemployment for those not part of the union. B is incorrect because lowering the wage of local outsiders can create animosity between different groups of workers and potentially lead to lowered efficiency due to reduced morale and increased turnover. D is incorrect because threatening a strike without following through can reduce the credibility of the union and ultimately weaken their bargaining power in future negotiations.

Unions Might Increase Efficiency in the Case Where They