If workers can do the work in both the unionized sector and the nonunionized sector, then an increase in the wage rate paid in the unionized sector (relative to the wage rate paid in the nonunionized sector), which is brought about by a permanent leftward shift in the labor supply curve, will lead to
A)an increase in the supply of labor in the nonunionized sector and lower wages in that sector.
B)an increase in the supply of labor in the unionized sector and lower wages in that sector.
C)no change in the supply of labor in either of the sectors mentioned.
D)an increase in the supply of labor in the unionized sector and even higher wages in that sector.
E)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When the wage rate in the unionized sector increases relative to the nonunionized sector due to a permanent leftward shift in the labor supply curve for the unionized sector, workers are more attracted to the higher wages in the unionized sector. This reduces the supply of labor in the nonunionized sector, leading to an increase in the supply of labor in the nonunionized sector as workers shift from the unionized sector. Consequently, the increased supply of labor in the nonunionized sector will put downward pressure on wages there.

If Workers Can Do the Work in Both the Unionized