The United Auto Workers bargained for higher wages and more benefits for autoworkers.As a result of the higher wages and increased benefits,
i.the quantity of new automobiles supplied decreases.
ii.the supply of new automobiles decreases.
iii.the supply of new automobiles increases.

Question

Quizplus · Accepted Answer

When wages and benefits increase, it raises the production costs for automakers. As a result, the supply of new automobiles decreases because the higher costs reduce the quantity of new automobiles automakers are willing and able to produce. Therefore, only statement ii is correct. Statement i is incorrect because the quantity supplied is determined by the supply curve, which is not affected by bargaining for higher wages and benefits. Statement iii is also incorrect because higher wages and benefits do not lead to an increase in the supply of new automobiles.

The United Auto Workers Bargained for Higher Wages and More