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A Union Raises the Wage of Firm X from $10

Question 40

Multiple Choice

A union raises the wage of firm X from $10 to $15 an hour.In which of these cases is there a direct reduction in the social welfare?


A) Worker A retains their job at company X, such that company X's profits associated with worker A go down $5 an hour.
B) Worker B, working for firm Y gets a lower wage due to the spill-over effect.
C) Worker C, who is getting $7 an hour working for firm Z, would have otherwise gotten a job with firm X at a wage of $8.
D) Worker D, who is working for firm M, gets a higher wage due to the threat effect.

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