Figure 12-3
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at point A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20, then the employment level
A) increases from 6,000 to 10,000.
B) increases from 3,000 to 10,000.
C) decreases from 10,000 to 3,000.
D) decreases from 6,000 to 3,000.

Question

Figure 12-3 
Refer to Figure 12-3. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at point A. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $20, then the employment level
A) increases from 6,000 to 10,000. 
B) increases from 3,000 to 10,000. 
C) decreases from 10,000 to 3,000. 
D) decreases from 6,000 to 3,000.

Quizplus · Accepted Answer

When a labor union establishes a union shop and negotiates an hourly wage of $20, the new equilibrium point is at point B where the quantity of labor demanded decreases to 3,000 and the quantity of labor supplied increases to 3,000. Therefore, the employment level decreases from 6,000 to 3,000.

Figure 12-3 Refer to Figure 12-3. This Figure Depicts Labor Demand and Labor