Question

Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotlating a wage increase for carpenters from $15 to $20 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations: Use the graph input tool to help you answer the following questions. You will not be graded an any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Granh Innut Thal Demand Shifter Pro-union Advertising (Mulions of dollars) The union's wage increase from $15 to $20 per hour causes an excess supply of workers. (Note: Be sure to enter your answer in thousands of workers.) Suppose that the union, in order to mitigate the unemployment caused by the wage increase, bolsters demand by rolling out a "Buy union" advertising campaign. If the union spends $5 million on the campaign, the excess supply of labor will be answer in thousands of workers.)

Answer 1

A labor union negotiating a wage increase for carpenters in the housing construction industry can result in an excess supply of workers, which can be reduced through an advertising campaign.

Step-by-step explanation:

In the housing construction industry, if a labor union negotiates a wage increase for carpenters from $15 to $20 per hour, it will result in an excess supply of workers. Let's assume that the excess supply is equal to 6,000 workers. Now, if the union spends $5 million on a 'Buy union' advertising campaign to mitigate the unemployment caused by the wage increase, the excess supply of labor will decrease.

Answer 2

In a perfectly competitive housing construction industry, a wage increase for carpenters negotiated by a labor union can lead to an excess supply of workers at the firm level. To mitigate unemployment, the union can launch a 'Buy union' advertising campaign to increase the demand for labor.

Step-by-step explanation:

In a perfectly competitive housing construction industry, where the labor and output markets are perfectly competitive, if a labor union negotiates a wage increase for carpenters from $15 to $20 per hour, it would lead to an excess supply of workers. With the wage increase, the labor demand curve for the individual firm would shift upward, resulting in a surplus of labor because the higher wage would cause more workers to be willing to work in the industry than the firms require.

To mitigate the unemployment caused by the wage increase, the union can bolster demand by launching a 'Buy union' advertising campaign. If the union spends $5 million on the campaign, it would increase the demand for labor, leading to a decrease in the excess supply of labor.