Question

If a union succeeds in rasing the wages of its members above the equilibrium, what is a likley outcome?a. unemployment.b. deflation.c. increased number of discouraged workers.d. an inward shift of the labor supply curve.

Answer 1

Answer: a. unemployment.

Explanation:

If a union manages to raise the wages of its members but this wage is above the equilibrium, it will lead to the producers making less than they are supposed to due to higher input costs.

They will therefore seek to reduce their input costs and they will do so by hiring less people and letting go of some of the workforce. This will reduce their input costs and bring them back to equilibrium but will lead to unemployment in the nation.