Figure 19-2

-Refer to Figure 19-2.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 19-2
 
-Refer to Figure 19-2.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 the union establishes a union shop and negotiates a higher hourly wage of $20, some firms cannot afford to pay this higher wage, leading to a decrease in the quantity of labor demanded from 6,000 to 3,000 at point B. At the same time, the higher wage attracts more workers into the labor market, resulting in an increase in the quantity of labor supplied from 6,000 to 10,000 at point B. Thus, the new equilibrium point is at point B with a lower employment level of 3,000. Therefore, the correct answer is D.

Figure 19-2 -Refer to Figure 19-2.This Figure Depicts Labor Demand and Supply