A union representative observed that if the union members' wages were increased by some proportion, the workers would eventually suffer a greater than proportional decline in employment. This statement could best be explained if
A) the new wages are to take effect immediately.
B) union labor can easily be replaced with capital.
C) union labor is an insignificant portion of the total cost of production.
D) the demand for the final product the workers produce is relatively inelastic.

Question

Quizplus · Accepted Answer

If union labor can easily be replaced with capital, employers might substitute labor with capital when wages increase, leading to a greater than proportional decline in employment.

A Union Representative Observed That If the Union Members' Wages