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

The establishment of a union shop and negotiation of a higher hourly wage increases the cost of labor for firms. This leads to a decrease in labor demand from Qd1 to Qd2 and a surplus of labor (unemployment) at the union wage of $20. As a result, employment decreases from 6,000 to 3,000 workers. Point B on the graph represents the new equilibrium after the union's intervention.

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