Figure 19-6
-Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market wage is $15. Suppose a labor union forms and subsequently negotiates an hourly wage of $20.00. Which of the following statements about the impact of the union's formation on labor hours demanded is true?
A)Labor hours demanded by widget firms will decrease by 20 hours.
B)Labor hours demanded by widget firms will decrease by 30 hours.
C)Labor hours demanded by widget firms will increase by 20 hours.
D)Labor hours demanded by widget firms will increase by 30 hours.

Question

Figure 19-6​ 
-Refer to Figure 19-6. This figure depicts labor demand and supply for the widget industry. The equilibrium market wage is $15. Suppose a labor union forms and subsequently negotiates an hourly wage of $20.00. Which of the following statements about the impact of the union's formation on labor hours demanded is true?
A)Labor hours demanded by widget firms will decrease by 20 hours. 
B)Labor hours demanded by widget firms will decrease by 30 hours. 
C)Labor hours demanded by widget firms will increase by 20 hours. 
D)Labor hours demanded by widget firms will increase by 30 hours.

Quizplus · Accepted Answer

When the labor union negotiates a wage of $20, it is above the market equilibrium wage of $15. At this wage level, the quantity of labor supplied will increase while the quantity of labor demanded will decrease. Therefore, labor hours demanded by widget firms will decrease. The amount of decrease can be calculated by finding the change in quantity demanded by moving from a wage of $15 to $20, which is 30 hours according to the graph. Therefore, the correct answer is B.

Figure 19-6​ -Refer to Figure 19-6. This Figure Depicts Labor Demand and Labor

Figure 19-6 -Refer to Figure 19-6. This Figure Depicts Labor Demand and Labor