Question

A union representative observed that if the union members' wages were increased by some proportion, the workers would eventually suffer a greater than proportional decline in employment. This statement could best be explained if:A. The new wages are to take effect immediatelyB.Union labor can easily be replaced with capitalC. Union labor is an insignificant portion of the total cost of productionD. The demand for the final product the workers produce is relatively inelastic

Answer 1

Answer:

B

Explanation:

The union representative in this question is of the view that if there should be an increase in the amount of wages that union members receive, the workers tend to suffer a greater decline than proportional decline in employment. What he is trying to drive at is that should the wages be increased, there will not be a proportional decrease in the unemployment but rather a greater decrease in it.

What the question now seeks to know is that in what scenario would the assertion of this labor representative is true?

Now, this assertion made by him could be true if capital could replace union labor. The reason is this, even if the number of wages is increased, in a situation where labor is irreplaceable by capital cost, there would only be a proportional decline in the number of workers needed as there is no direct alternative for the labor if offset. But in a case where there are alternatives, for example having a machine that could carry out the same process, this in terms of capital cost acquisition, there would obviously be a decrease in the amount of labor force needed, and hence, a decline