refer to the following diagram. Wages in both the union and nonunion sectors are initially $10. The union then negotiates a wage rate of $12. The post-negotiation nonunion wage is not yet known.
-The threat effect would be modeled by:

Question

Quizplus · Accepted Answer

The threat effect occurs when the union negotiates a higher wage rate than the nonunion sector, causing the nonunion workers to feel the pressure to form a union and negotiate for higher wages as well. To model this effect, the nonunion wage must be raised above its equilibrium level, making unionization more attractive and decreasing the measured union wage advantage. Therefore, the best choice is D.

Refer to the Following Diagram