Labour unions cause unemployment because the union contract wage is set
A)below the market wage, causing a shortage of labour.
B)below the market wage, causing a surplus of labour.
C)above the market wage, causing a surplus of labour.
D)above the market wage, causing a shortage of labour.
E)equal to the market clearing wage.

Question

Quizplus · Accepted Answer

When a labour union contract specifies wages above the market clearing wage, it creates a surplus of labour, as more people want to work at that higher wage rate than there are available jobs. This results in some workers being unemployed or forced to seek work elsewhere, causing an increase in unemployment.

Labour Unions Cause Unemployment Because the Union Contract Wage Is