Which of the following is correct?
A)All economists believe that unions are bad for the economy as a whole.
B)Unions raise wages above the competitive equilibrium level.
C)Unions increase the level of employment in unionized firms.
D)Unions decrease the level of employment in nonunionized firms.

Question

Quizplus · Accepted Answer

Option B is correct as unions often negotiate wages that are higher than what the market would have otherwise determined as the equilibrium level. This can increase the cost of production, reduce profits, and ultimately lead to a decrease in employment. Option A is incorrect because economists may have differing opinions on the effects of unions on the economy. Option C is not necessarily true as unionization can sometimes lead to firms substituting capital for labor, which can lead to a decrease in employment. Option D is also not necessarily true as nonunionized firms can face competitive pressure to raise wages in order to attract and retain workers in a unionized market.

Which of the Following Is Correct