FIGURE 14- 2 
-Refer to Figure 14- 2.Suppose the labour market is initially in a monopsonistic equilibrium.If a strong union is then formed and establishes a minimum wage of W1,
A) the wage rate and employment will both increase to their competitive levels.
B) the wage rate will increase but employment will decrease.
C) there will be an effect on either wages or employment but not both.
D) the wage rate will decrease but employment will increase.
E) employment will decrease to Q2.
Correct Answer:
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