Answered: Consider two states that adopt…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider two states that adopt different laws concerning labor unions.

The following graph shows the labor market in a state in the North. Initially, the market-clearing wage there is $8.00 per hour.

Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union negotiates a wage of $10.00 per hour.

Use the graph input tool to help you answer the following questions. *Attached*

Enter $10.00 into the box labeled Wage on the previous graph.

Hint: Be sure to pay attention to the units used on the graph.

At the union wage, _________ union workers will be employed.

The following graph shows the labor market in a state in the South. The legislature in this state passes strong "right-to-work" laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the two states are very similar.

The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.

Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state.

Adjust the graph to show what happens to employment and wages in the southern state. *Graph attached*

Which of the following groups are better off as a result of the union action in the northern state? Check all that apply.

A. Workers in the northern state employed at the union wage

B. The original workers in the southern state

C. All workers in the northern state

D. Workers who find new jobs in the southern state

Graph Input Tool
Market for Labor
16
I Wage
(Dollars per hour)
14
Supply
2.00
Labor Demanded
(Thousands of
workers)
Labor Supplied
(Thousands of
workers)
12
1,400
10
Demand
4
2
200
400
600
800
1000 1200 1400 1600
LABOR (Thousands of workers)
WAGE (Dollars per hour)

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