The following figure shows curves for labor demand and labor supply.

-Refer to the figure above.If labor unions negotiate the wage to be fixed at WH,we refer to the difference between ________ and ________ as ________.

Question

The following figure shows curves for labor demand and labor supply.
 
-Refer to the figure above.If labor unions negotiate the wage to be fixed at WH,we refer to the difference between ________ and ________ as ________.

Quizplus · Accepted Answer

If labor unions negotiate the wage to be fixed at WH, the quantity of labor supplied would exceed the quantity of labor demanded, meaning there would be a surplus of workers or unemployment. Therefore, the difference between Q₅ (quantity supplied) and Q₁ (quantity demanded) is referred to as structural unemployment. Choice A is incorrect because Q₅ and Q₃ are both on the labor supply curve and do not represent involuntary unemployment. Choice B is incorrect because Q₃ and Q₁ do not represent wage rigidity but rather a surplus of workers due to a fixed wage. Choice D is incorrect because there is no indication of voluntary unemployment in the figure.

The Following Figure Shows Curves for Labor Demand and Labor