Suppose a Powerful Labor Union Negotiates a Wage for Its

question 17

Multiple Choice

Suppose a powerful labor union negotiates a wage for its members above the equilibrium wage rate in a nonunionized market. A likely result of this is that

• A) the union will have difficulty recruiting new members.
• B) union members will be able to work more overtime than before.
• C) this firm will make up for the higher wage rate by expanding output.
• D) not everyone who wants to work at the new wage will be able to find jobs.

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Definitions:

Internal Rate

Often refers to the internal rate of return (IRR), a metric used to evaluate the profitability of potential investments.

Investment Project

A project or activity requiring capital expenditure with the expectation of generating financial returns over time.

Discount Factor

A multiplier used in discounting to calculate the present value of future cash flows or earnings.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity and short-term financial health of the business.