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are150-review-questions-4-answers - University of...

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University of California, Davis Department of Agricultural and Resource Economics ARE 150 Fall 2009 Philip Martin Dist 11/10/09 [email protected] Due 12/1/09 Review Questions 4 1A. Typical ALRB remedies for ULPs are (1) cease and desist orders, that is, order the offending employer or union to stop violating worker rights, and then (2) restore the economic status quo by e.g. reinstating unlawfully fired workers with back pay or providing make whole payments to workers who suffered wage losses while the employer bargained in bad faith. The purpose of ALRB remedies is to promote economic efficiency—work can continue while charges of ULPs are resolved, and those affected know they will not suffer economic losses. B. The makewhole remedy transfers wage and benefit savings to affected workers from employers who refused to bargain in good faith and thus saved money that would have been paid to workers if there had been good-faith bargaining. The purposes of the makewhole remedy are to (1) encourage good- faith bargaining, (2) protect employers who bargain in good faith so that they are not at a cost disadvantage relative to employers who fail to bargain, and (3) prevent the undermining of unions who promise wage increases but cannot obtain them because employers refuse to bargain in good faith. 2A. A strike by workers aims to reduce the supply of the good as workers refuse to work, while a boycott aims to reduce the demand for the good by persuading consumers not to buy the good. A partially effective strike reduces the supply of a commodity along a given or fixed supply or MC curve, since the lettuce or trees are already planted. Students should draw an inelastic demand curve with an initial equilibrium at a and show a strike-caused reduction of supply along the industry MC or supply curve that leads to a new grower price on the original demand curve at a higher price like b (p166 text). The diagram on p166 of the text illustrates how the union’s partially effective strike reduced the supply of Imperial lettuce toward the profit-maximizing quantity that would have been supplied if lettuce growers were a single-firm monopolist finding Q* where MC=MR and setting a price according to the demand curve. Key points—lettuce is already planted, so the supply is fixed. We assume the strike does not change demand—instead, it reduces supply from a to d , and the new equilibrium price and grower (total) revenue are indicated by the demand curve.
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Boycotts aim to reduce demand by persuading some consumers not to buy the product. This shifts the demand curve inward, slightly lowering the quantity sold but significantly lowering grower prices along inelastic supply curves. In the figure (p168), the boycott reduces grower prices from P0 to P1 but, as long as P1 is above the AVC of production for an individual grower, the grower will harvest the commodity, which keeps most farm workers employed and earning their usual wages.
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