1. (Increasing Demand for Union Labor)Identify four ways that unions try to increase demand for unionized workers.

2. (Asymmetric Information)Define asymmetric information. Distinguish between hidden characteristics and hidden actions. Which type of asymmetric information contributes to the principal-agent problem?

3. (Search with Imperfect Information)The following questions concern the accompanying graph.

a. Identify the two curves shown on the graph and explain their upward or downward slopes. (Hint: CurveA represents the marginal cost (MC) of searching for additional information; curveB represents the marginal benefit (MB) of additional information).

b. Why does curve A intersect the horizontal axis?

c. What is the significance of quantity d?

d. What does e represent?

e. How would the optimal quantity of information change if the marginal benefit of information increasedthat is, if the marginal benefit curve shifted upward?