Question

Which of the following is not correct? a. When unions raise wages above equilibrium, the quantity of labor supplied increases, and the quantity of labor demanded decreases. b. Like any cartel, a union is a group of sellers acting together in the hope of exerting their joint market power. c. When a union is present in a labor market, wages are determined by the equilibrium of supply and demand. d. Most workers in the U.S. economy are not members of a union.

Answer 1

Option (c)

Step-by-step explanation:

(a) It is the correct statement.

When the wages of workers raise by the unions and it is set above the equilibrium then as a result the quantity supply of labor increases because every worker in the market wants to earn higher wages. From the point of view of the firms, it will be expensive for the firm to hire workers at this wage rate. Hence, the quantity demanded for labor decreases.

(b) It is the correct statement.

Union helps in improving the efficiency of the workers and employees. In a union, the efficiency is achieved with the collective bargaining power of the workers.

(c) It is not the correct statement.

When a union is already present in the labor market, then the wages of the workers is set by the union members. It is not determined by the equilibrium of the two forces: demand and supply.

(d) It is the correct statement.

It is evident from the fact that the union membership were declining over the years.