5. Figure: Unions: Set Wages Unions: Set Wages Labor Supply 18 Wage 16 14 12 -Se

Question

5. Figure: Unions: Set Wages Unions: Set Wages Labor Supply 18 Wage 16 14 12 -Set wage 10- Labor Demand 0 10 20 30 40 50 26.67 Labor Refer to the graph above to answer the following questions. Suppose the union negotiates a set wage above the market equilibrium. 5. a. What were the market wage and number of workers hired before the wage negotiation? (l pt.) b. How many workers will the firm hire after the wage negotiation? (1 pt.) c. What do you expect will happen to the displaced workers? (1 pt.) 6. Which of the following is NOT one of the reasons that office cleaners in India earn less than office cleaners in the United States?: (1 pt., CHOOSE 1) A) American office cleaners have a higher marginal product of labor than Indian office cleaners B) A higher percentage of the worker population in India is willing to work as an office cleaner. C) the American economy is more productive than the Indian cconomy D) the Indian economy is more productive than the U.S. economy.

Explanation / Answer

5.

A) Free market equilibrium occurs at point of intersection of demand and supply curves. This occurs at wage of $8 amd employment of 20 workers

B) After wage settlement, supply of workers is 25 while demand is 10.

Thus surplus of labor = 25-10 = 15 workers

C) Displaced workers will be unemployed till they find a good job

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