Figure 19-2
-Refer to Figure 19-2. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at $10. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $12.50, then employment is
A)500.
B)600.
C)700.
D)800.

Question

Figure 19-2 
-Refer to Figure 19-2. This figure depicts labor demand and supply in a nonunionized labor market. The original equilibrium is at $10. If a labor union subsequently establishes a union shop and negotiates an hourly wage of $12.50, then employment is
A)500. 
B)600. 
C)700. 
D)800.

Quizplus · Accepted Answer

At the negotiated wage of $12.50, the quantity of labor demanded decreases to 500, while the quantity of labor supplied would increase, creating a surplus of labor at that wage level. The employment level is determined by the quantity of labor demanded by employers, which is 500.

Figure 19-2 -Refer to Figure 19-2. This Figure Depicts Labor Demand and Labor