Suppose that an economy is in a steady state, so that ongoing union organization is just enough to maintain some constant density of union coverage. A new law is passed that greatly increases the penalties for firms found to have violated laws about behavior during union elections. Assume that all other inputs into the model are unchanged.
A. What will be the direct effect of this law on management resources devoted to opposing union elections?
B. How would this law affect the level of resources that unions dedicate to new organizing activity?
C. What would be the short-run effect of the law on the rate of new union organization?
D. Over time, how would this law affect union density?