Refer to the information provided in Figure 14.1 below to answer the questions that follow.
Figure 14.1
-Refer to Figure 14.1.The demand for labor falls from D to D'.If firms enter into social,or implicit,contracts with workers not to cut wages,then the wage rate will remain at $10 and

Question

Refer to the information provided in Figure 14.1 below to answer the questions that follow.
  Figure 14.1
-Refer to Figure 14.1.The demand for labor falls from D to D'.If firms enter into social,or implicit,contracts with workers not to cut wages,then the wage rate will remain at $10 and

Quizplus · Accepted Answer

When the demand for labor falls from D to D', the equilibrium point shifts from point A to point B, resulting in a decrease in employment from 300 million to 150 million. However, if firms enter into social contracts not to cut wages, the wage rate remains at $10. As the quantity demanded (150 million) is less than the quantity supplied (300 million) at the wage rate of $10, excess labor supply exists in the market, implying that unemployment will increase, and employment will fall to 150 million. Therefore, the correct choice is A.

Refer to the Information Provided in Figure 14