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Answer to Question #62855 in Macroeconomics for Gian

Question #62855
The insider-outsider theory of unemployment says that ...(several answers possible)
(a) trade unions do not internalize sufficiently the well-being of the unemployed.
(b) trade unions can be a cause for involuntary unemployment.
(c) trade unions tend to increase wages above the competitive level.
(d) the position of trade unions should be bolstered in order to lower unemployment.
Expert's answer
(b), (c)
Monopoly power of insiders allows them to overestimate wage above the equilibrium level. As a result, the economy appears unemployed contingent of which is formed by outsiders of various firms.

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