A law mandating that unions cut wages in order to create more jobs
A) would cause market failure due to price distortion.
B) would be Pareto efficient because it would reduce income inequality.
C) would be Pareto efficient because no one would lose a job and some would get a job.
D) would not be Pareto efficient because such a law would need to be voluntarily accepted by all who are affected by the law.

Question

Quizplus · Accepted Answer

A Pareto efficient outcome requires that no one can be made better off without making someone else worse off. Forcing wage cuts is not voluntary and would make current workers worse off, thus it is not Pareto efficient.

A Law Mandating That Unions Cut Wages in Order to Create