Sometimes wages are set above the equilibrium level when
A)garbage collectors earn higher wages than secretaries due to compensating differentials.
B)accountants earn more than dental technicians due to higher educational requirements.
C)movie superstars earn more than talented plumbers.
D)unions negotiate higher wages by threatening to strike.

Question

Quizplus · Accepted Answer

If unions negotiate higher wages by threatening to strike, they may be able to set wages above the equilibrium level. The demand for labor may be high enough that firms are willing to pay the higher wages in order to avoid disruption to their business. However, this may result in unemployment for some workers who are willing to work at the equilibrium wage level but are unable to find a job at the higher wage level set by the union.

Sometimes Wages Are Set Above the Equilibrium Level When