Now suppose a workers’ union is created and successfully negotiates wage WUNION, which is above both W* and WMIN, i.e. WUNION>WMIN>W*. Explain what the labour market outcomes will be compared to the previous part
KINDLY ANSWER quetion "d"
5) (KEY QUESTION) Minimum Wages and Unions
a. Assume an industry without legal minimum wages and unions. Show in a diagram how the equilibrium
wage W* is determined, and briefly explain all the concepts in the diagram.
b. Now suppose a minimum wage, WMIN, is legislated at a level lower than W*, i.e. WMIN<W*. Show it in the
diagram and explain whether the labour market outcomes in part a. change, and how.
c. Now suppose a minimum wage is legislated at a level higher than W*, i.e. WMIN>W*. Show it in the
diagram and explain what the labour market outcomes will be.
d. Now suppose a workers’ union is created and successfully negotiates wage WUNION, which is above both
W* and WMIN, i.e. WUNION>WMIN>W*. Explain what the labour market outcomes will be compared to the
previous part
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