15. Markets for the Factors of Production
Unions
Multiple Choice
Why might unions raise wages for some workers?
A
Because unions directly increase worker productivity, making firms willing to pay higher wages.
B
Because unions raise the overall labor supply by recruiting more workers, which pushes wages up.
C
Because unions use collective bargaining and membership rules to limit labor supply and exert market power, allowing them to negotiate wages above competitive levels.
D
Because unions lower firms' nonwage costs so employers can afford to pay higher wages.
Verified step by step guidance1
Understand the role of unions in the labor market: Unions represent workers collectively to negotiate wages and working conditions with employers.
Recognize that unions can influence wages by using collective bargaining, which allows them to negotiate higher wages than individual workers might achieve alone.
Identify that unions often use membership rules or other mechanisms to limit the supply of labor available to employers, effectively reducing labor supply in the market.
Understand that by limiting labor supply and exerting market power, unions can push wages above the competitive equilibrium level where supply equals demand.
Note that this wage increase is not primarily due to increased productivity or reduced nonwage costs, but rather due to the union's ability to restrict labor supply and negotiate better terms for workers.
