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Figure 19-6 Figure 19-6 Refer to Figure 19-6. This figure depicts labor demand and supply for...

Figure 19-6

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 30 hours.
b. Labor hours demanded by widget firms will decrease by 20 hours.
c. Labor hours demanded by widget firms will increase by 30 hours.
d. Labor hours demanded by widget firms will increase by 20 hours.
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Answer #1

Ans. Since you have not attached the figure to the question i cannot give the correct answer but i i c try to give you the concept.

When the hourly wage rises the quantity of labor hours demanded decreases since it becomes relatively more expensive for the firm employing. There will be a decrease of either 20 or 30 hours depending on the difference between quantity demanded when price was $15 and quantity demanded when price is $20.

Thus, answer is either a or b depending on the above difference.

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