When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be ______ the equilibrium wage.
A) much greater than
B) much less than
C) almost equal to
D) about one-half of

Question

Quizplus · Accepted Answer

When insiders (current employees) have a greater impact on the wage-bargaining process than outsiders (potential new hires), they are likely to negotiate for higher wages for themselves, leading to wages that are much greater than the equilibrium wage that would be set by the supply and demand for labor.

When Insiders Have a Much Greater Impact on the Wage-Bargaining