Question

Consider two states that adopt different laws concerning labor unions. 

The following graph shows the labor market in a state in the North. Initially, the market clearing wage is $10 per hour. Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union negotiates a wage of $12 per hour. 

Use the black point (plus symbol) to show how many union workers will be employed at the $12 wage. (Hint: Be sure to place the point on the appropriate curve.) 

The following graph shows the labor market in a state in the South. The legislature in this state pastes strong right to work laws that make it very difficult for unions to organize workers, so the wape is always equal to the market clearing value. Except for this difference in Legislation, the two states are very similar. 

The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state. 

Adjust the graph to show what happens to employment and wages in the southern state after some workers in the northern state lose their jobs and decide to move to the southern state. 

Answer 1