Suppose the federal government allows labor unions to act as the sole seller in labor markets, but the government collects an annual $10,000,000 "administrative fee" from each union in this situation. Assuming this fee is not so large that it forces the unions to disband, what is the impact of this fee on the equilibrium wage and employment level in the monopolized labor market?
A) Wages and employment decline.
B) Wages increase and employment declines.
C) Employment increases and wages decline.
D) No change in wages or employment levels.

Question

Quizplus · Accepted Answer

The administrative fee is a fixed cost and does not affect the marginal cost of labor, so it does not change the equilibrium wage or employment levels in the labor market.

Suppose the Federal Government Allows Labor Unions to Act as the Sole