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Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the...

Assume the union contract wage exceeds the market-clearing wage. If there is an increase in the labor supply, then the number of unemployed workers will ______ and the number of employed workers will _______.

1) increase; increase

2) decrease; increase

3) increase; decrease

4) increase; not change

Solutions

Expert Solution

option 4

The increase in the labor supply shifts the labor supply curve to the right which increases the quantity of labor supplied at the contract wage but the quantity labor demanded will not changes so the unemployment increases and employed will be same

Unemployed =quantity of labor supplied - a quantity of labor demanded

employed =quantity of labor demanded.

Rahul Sunny answered 2 years ago
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