Understanding Labor Unions in Economics

What is the primary purpose of a labor union?

• To increase government taxes

• To represent workers in negotiations with employers

• To set product prices in the market

• To manage company profits

Which of the following is a common method used by labor unions to achieve their goals?

• Issuing company stocks

• Organizing strikes

• Lowering interest rates

• Setting minimum wage laws

Which term describes a situation where an employer and a labor union negotiate the terms of employment?

• Collective bargaining

• Price fixing

• Free trade

• Deregulation

Suppose a labor union successfully negotiates higher wages for its members. What is a possible effect on the company’s cost of production?

• The cost of production will decrease

• The cost of production will remain unchanged

• The cost of production will increase

• The cost of production will be eliminated

A company is facing a strike organized by its workers’ union. As an economist, analyze and explain one potential short-term and one potential long-term impact this strike could have on the company’s operations.

• Short-term: Increased productivity; Long-term: Lower employee morale

• Short-term: Disrupted production; Long-term: Improved labor relations if an agreement is reached

• Short-term: Decreased wages; Long-term: Higher profits

• Short-term: More hiring; Long-term: Reduced union influence