Unionized workers may be able to negotiate with management for higher wages during periods of economic prosperity. Suppose that workers at automobile assembly plants successfully negotiate a significant increase in their wage package. How would the new wage contract be likely to affect the market supply of new cars?
A) Supply will shift to the right.
B) Supply will shift to the left.
C) Supply will not shift, but the quantity of cars produced per month will decrease.
D) Supply will not shift, but the quantity of cars produced per month will increase.

Question

Quizplus · Accepted Answer

An increase in wages raises the cost of production for automobile manufacturers. Higher production costs can lead to a decrease in the supply of new cars, as it becomes more expensive for companies to produce the same quantity of cars. This scenario is represented by a leftward shift in the supply curve.

Unionized Workers May Be Able to Negotiate with Management for Higher