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22 April, 23:11

Wage Rate Quantity of Labor Demanded $16 800 14 1,000 12 1,200 10 1,600 8 1,800 Refer to the given data. Suppose that the union that provides labor to firms in this market successfully negotiates an increase in the wage rate from $8 to $10. As a result of the wage increase, firms will hire

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  1. 23 April, 00:05
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    Firm will hire 1,600 units of labor thus, will decrease their labor hours by 200 due to increase in wage rate generate for the labor union

    Explanation:

    From $8 per hour to $10 per hour the labor demanded by the company's will decrease from 1,800 to 1,600

    That's because the increase is arbitrary obtained through the pressure of strifes and other forms and not generated for an increase in productivity of the employees. As there is no increase in productivity the company's will hire less labor as it find the marginal benefit equal to zero in a lower quantity.

    Only through increase in productivity the company will accept higher pay without decreasing their labor demand.
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