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Q. 2FCT

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Economics Today
Found in: Page 663

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Short Answer

Why could unions' desire to obtain collective bargaining exemptions from minimum wage laws provide evidence that few employers are monopsonists? (Hint: Recall the effects of a minimum wage on the employment level of and wage rate paid by a monopsonist.)

They help to reduce disparities. Additionally, they may be able to assist in limiting inefficiently low employment that occurs when businesses pay below-market prices to fight monopsony dominance.

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Step by Step Solution

Step 1: Introduction

Membership in signatory employer groups and trade unions, as well as agreement expansions to other firms and workers in a sector, are all linked to collective bargaining coverage (the percentage of workers covered by collective agreements).

Step 2: Given Information

Few businesses are monopsonists, as evidenced by unions' desire to acquire collective bargaining exemptions from minimum wage regulations.

Recall the effects of a minimum wage on a monopsonist's employment level and wage rate paid.

Step 3: Explanation

A corporation with monopoly power can charge higher rates for a product it provides without losing all of its customers due to a lack of competition from other enterprises supplying the same or similar items.

Unions have a substantial distributional influence, as they help to raise wages and improve working conditions for lower-wage workers by raising worker bargaining power. As a result, they contribute to the reduction of inequality. Furthermore, they may be able to help limit inefficiently low employment that happens when enterprises pay below-market rates when they work to challenge monopsony dominance.

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