Question

Consider an economy with two labor markets: one for manufacturing workers and one for service workers. Suppose initially that neither is unionized.

Which of the following will happen to the manufacturing labor market if manufacturing workers formed a union? Check all that apply.

The wage of manufacturing workers will rise.

The quantity of manufacturing workers demanded will fall.

The quantity of manufacturing workers supplied will rise.

There will be an increase in employment of manufacturing workers.

Which of the following describes the effect of the changes in the manufacturing labor market on the market for service workers, which is not unionized? Check all that apply.

The wage of service workers will rise.

The supply of service workers will rise.

The demand for service workers will remain unchanged.

Some service workers will become unemployed.

Answer 1

If union is formed in the manufacturing sector, the union will push for higher wages so wage would increase. This would reduce the quantity demanded for labor so employment will fall and there will be unemployment

The wage of manufacturing workers will rise. The quantity of manufacturing workers demanded will fall.

With surplus of workers, these will shift to the market of services so they increase labor supply. Hence the wage rate would fall and quantity of workers there would increase

The supply of service workers will rise. The demand for service workers will remain unchanged.