Suppose a powerful labor union negotiates a wage for its members above the equilibrium wage rate in a nonunionized market. A likely result of this is that
A) the union will have difficulty recruiting new members.
B) union members will be able to work more overtime than before.
C) this firm will make up for the higher wage rate by expanding output.
D) not everyone who wants to work at the new wage will be able to find jobs.

Question

Quizplus · Accepted Answer

By negotiating a wage above the equilibrium rate, the union is effectively creating a surplus of labor, as there will be more workers willing to work at this higher wage rate than there are jobs available. This will lead to unemployment among those who are willing to work but are unable to find employment at the artificially elevated wage rate.

Suppose a Powerful Labor Union Negotiates a Wage for Its