refer to the following graph, in which all product markets are assumed to be competitive.'

-Assume the two labor demand curves are identical,and that all union workers who lose their job as a result of the union wage increase from W_n to W_u find jobs in the nonunion sector.The area corresponding to the efficiency loss is:

Question

refer to the following graph, in which all product markets are assumed to be competitive.'

-Assume the two labor demand curves are identical,and that all union workers who lose their job as a result of the union wage increase from W_n to W_u find jobs in the nonunion sector.The area corresponding to the efficiency loss is:

Quizplus · Accepted Answer

The efficiency loss due to the union wage increase can be seen as the deadweight loss of the triangle c'abd' in the graph. This loss represents the decrease in total surplus (i.e. the sum of consumer surplus and producer surplus) that results from the deviation of the wage from the competitive level (i.e. where supply and demand meet without a union intervention).

Option B) is incorrect because it shows the difference in wages between the union and nonunion sectors, but this difference is not relevant for the calculation of efficiency loss. Similarly, options C) and D) show different areas, but they do not correspond to the efficiency loss.

Therefore, the correct answer is A) c'abd'.

Refer to the Following Graph, in Which All Product Markets