Union might increase efficiency in the case Where they ?
Correct answer: C. Offset the market power of a large firm that is the dominant employer in a region
- 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 not lost hours of work
Explanation
A union can improve efficiency by countering the monopsony power of a dominant regional employer, which otherwise may suppress wages and employment below competitive levels. Raising wages above equilibrium alone is not necessarily efficient because it can create unemployment.
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