Suppose that a union increases wages by 10% but that the impact of this is exactly offset by the union also increasing labor productivity by 10%.Which of the following will occur if the firm can freely set employment levels?

Question

Quizplus · Accepted Answer

The union wage increase is offset by the productivity increase, so the cost of production remains the same. However, the firm can now produce more output with the same number of workers, so it will reduce employment.

Suppose That a Union Increases Wages by 10% but That