Figure 14.4
-Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers,and both groups of workers earn the perfectly competitive wage.What happens to the equilibrium employment level and wage for union workers?
A)Both increase.
B)Employment increases and wage declines.
C)Wage increases and employment declines.
D)Both decline.

Question

Figure 14.4
-Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers,and both groups of workers earn the perfectly competitive wage.What happens to the equilibrium employment level and wage for union workers?
A)Both increase. 
B)Employment increases and wage declines. 
C)Wage increases and employment declines. 
D)Both decline.

Quizplus · Accepted Answer

With perfectly inelastic supply, the quantity supplied of union and non-union workers remains constant regardless of the wage. If the demand for union workers remains unchanged, the equilibrium employment level for union workers will remain constant. However, since the demand for union workers is less elastic than for non-union workers (due to the benefits and protections provided by unions), the wage for union workers will increase while the employment level declines. Therefore, the answer is C, as the wage increases and employment declines for union workers.

Figure 14.4 -Suppose a Labor Market Has Perfectly Inelastic Supply That Is