In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as
A) consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores.
B) consumers' substitution of cheaper goods for goods whose prices increase.
C) the bias from quality changes in existing products that cause prices to increase.
D) the bias from new goods being introduced that are more expensive than older goods.
E) the bias that arises because the BLS changes the CPI market basket each month.
B
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An increase in the percentage of the labor force that is unionized will cause average wages for all workers to rise because
a. union labor is more productive. b. profit levels are lowered to increase wages. c. strike threats promote wage increases. d. This is a trick question because greater unionization does not imply higher average wages.
If the union wants to follow the strategy of maximizing member's income, wages should be set
A) above the market clearing wage rate. B) such that all that wanted to work could work. C) at the market clearing wage rate. D) at the point at which the price elasticity of demand equals 1.