Which of the following is the best theoretical explanation for why strikes occur?
A. The union and firm know that it is impossible to eventually negotiate an outcome on the contract curve.
B. The firm has a downward-sloped resistance curve.
C. The firm wants to minimize labor costs.
D. The union's leadership wants to please management.
E. The union does not know how valuable labor is to the firm.
Answer: E
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The rational expectations hypothesis suggests that
A) unanticipated fiscal policy actions are more powerful than monetary policy actions. B) fiscal policy actions only work when accompanied by changes in the money supply. C) anticipated monetary policy actions are more powerful than fiscal policy actions. D) anticipated fiscal and monetary policy actions are not likely to achieve their stated aims.
A tax on a polluting industry
A) is not desirable because it reduces efficiency. B) leads to less output in this industry. C) causes more resources to be used in the polluting industry. D) shifts the marginal social benefit curve leftward. E) shifts the marginal social benefit curve rightward.