When labour unions successfully bargain for wage rates that are _____ the equilibrium wage rate,they may cause _____.
A) lower than;frictional unemployment
B) equal to;shortages in that labour market
C) higher than;an increase in structural unemployment
D) higher than;shortages in that labour market

Question

Quizplus · Accepted Answer

When labour unions successfully bargain for wage rates that are higher than the equilibrium wage rate, it creates an artificial increase in the cost of labour for employers. This can lead to an increase in the cost of production, which can cause employers to reduce their demand for labour. Hence, there is a possibility of an increase in structural unemployment.

When Labour Unions Successfully Bargain for Wage Rates That Are