Consider a labor market with two sectors-a union sector and a non-union sector-with perfectly inelastic labor supply. The presence of the union sector causes all of the following results except:
A) the union wage is greater than the competitive wage when there is no union sector.
B) the nonunion wage is less than the competitive wage when there is no union sector.
C) fewer workers are hired in the union sector than those same firms would hire if there was no union sector.
D) more workers are hired in the nonunion sector than those same firms would hire if there was no union sector.
E) total surplus added between the union sector and the nonunion sector is the same as total surplus when there is no union sector.

Question

Quizplus · Accepted Answer

The presence of a union typically results in higher wages in the union sector compared to the competitive wage (A), which can lead to lower wages in the nonunion sector due to the surplus of labor available there (B). Fewer workers are hired in the union sector due to the higher wages (C), and more workers might be hired in the nonunion sector due to the lower wages and surplus of labor (D). However, the total surplus (the sum of consumer and producer surplus) is not the same as when there is no union sector; it is generally lower due to inefficiencies introduced by the union wage being above the market-clearing level, leading to deadweight loss (E).

Consider a Labor Market with Two Sectors-A Union Sector and a Non-Union