If a union is able to decrease the supply of workers in a competitive labour market but the union cannot affect the demand for its members' labour, then
A) wages and the quantity of labour hired will both decrease.
B) wages will decrease but the quantity of labour hired will increase.
C) wages and the quantity of labour hired will both increase.
D) wages will increase but the quantity of labour hired will decrease.

Question

Quizplus · Accepted Answer

When a union decreases the supply of workers without affecting the demand for labor, it creates a shortage of workers at the current wage rate. Employers will then compete for the available workers, driving wages up. However, at higher wages, employers will hire fewer workers, leading to a decrease in the quantity of labor hired.

If a Union Is Able to Decrease the Supply of Workers