Suppose there is a competitive market for retail workers at a large shopping mall that is large enough to constitute its own labour market.The labour demand curve is QD = 1000 - 20(w).The labour supply curve is QS = 400 + 40(w).Suppose that a union now successfully organizes the workers at this mall and obtains a wage rate of $13 (but does not affect the position of the demand curve).One result is

Question

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When the union successfully organizes the workers and obtains a wage rate of $13, the new labour supply curve becomes QS=$840. Substituting this into the labour demand equation gives us:

QD= 1000 - 20w = 1000 - 20(13) = 600

Therefore, the new equilibrium point is at a wage rate of $13 and an employment level of 600 workers. Since the original equilibrium employment level was 700 workers, there is now a decrease in employment of 100 workers (700 – 600 = 100), which corresponds to answer E.

Suppose There Is a Competitive Market for Retail Workers at a Large