Refer to the Following Graph, in Which All Product Markets

question 49

Multiple Choice

refer to the following graph, in which all product markets are assumed to be competitive.'




-The allocative efficiency loss implied by the diagram is a static,short-run loss.Compared to the static loss,the dynamic,long-run loss is probably:

• A)greater,because unions reduce firm profitability and thereby inhibit investment
• B)greater,because unemployment is greater in the long run
• C)greater,as firms have a greater opportunity to exercise their monopsony power
• D)smaller,because the decline in nonunion wages increases the extent of poverty

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