If a union is able to bargain for a wage that is higher than the equilibrium:
A)all workers will earn a wage equal to their value of marginal product.
B)some excess supply of labor or unemployment will generally result.
C)compensating differentials will be erased.
D)diminishing returns will not exist.

Question

Quizplus · Accepted Answer

If a union is able to bargain for a wage higher than the equilibrium, it means they have secured a wage rate above the market-clearing wage. This creates a situation of excess supply of labor or unemployment since there will be more workers willing to work at the higher wage but fewer employers are willing to hire at that higher wage, resulting in a surplus of labor. This situation arises from the union's bargaining power that exceeds the free-market forces of supply and demand.

If a Union Is Able to Bargain for a Wage