-Figure 12-2 depicts demand and supply in a nonunionized labor market.The original equilibrium is at point A.If a labor union subsequently negotiates an hourly wage for its members of $20,then the profit-maximizing employment level
A)rises from 6,000 to 10,000
B)rises from 3,000 to 10,000
C)drops from 10,000 to 3,000
D)drops from 6,000 to 3,000
E)remains unchanged

Question

-Figure 12-2 depicts demand and supply in a nonunionized labor market.The original equilibrium is at point A.If a labor union subsequently negotiates an hourly wage for its members of $20,then the profit-maximizing employment level
A)rises from 6,000 to 10,000 
B)rises from 3,000 to 10,000 
C)drops from 10,000 to 3,000 
D)drops from 6,000 to 3,000 
E)remains unchanged

Quizplus · Accepted Answer

When a union negotiates a higher wage than the equilibrium wage, the quantity of labor demanded decreases, leading to a drop in employment from 6,000 to 3,000.

-Figure 12-2 Depicts Demand and Supply in a Nonunionized Labor