A union is formed to restrict labour supply in a previously perfectly competitive labour market.If the union succeeds in raising the wage,

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Quizplus · Accepted Answer

When the union succeeds in raising the wage, the cost of labor for employers increases. This will lead to a decrease in the demand for labor, and consequently, employment will fall. The increase in wage will also increase the cost of production for employers which may lead to a decrease in output, making it harder for firms to compete internationally. As a result, the total wage bill may not necessarily increase but may even fall if employment and output decrease due to the union's action.

A Union Is Formed to Restrict Labour Supply in a Previously