Answer to Question #60371 in Microeconomics for Bob

Question

Suppose a labour market has perfectly inelastic supply that is composed of union and non-union workers, and both groups of workers initially earn the perfectly competitive wage. What happens to the equilibrium employment level and wage for union workers if the union exercises its bargaining power?

a. Both increase.
b. Employment increases and wage declines.
c. Wage increases and employment declines.
d. Both decline.