A Union Raises the Wage of Firm X from $10

question 15

Multiple Choice

A union raises the wage of firm X from $10 to $15 an hour.In which of these cases is there a direct reduction in the social welfare?

• A) Worker A retains their job at company X, such that company X's profits associated with worker A go down $5 an hour.
• B) Worker B, working for firm Y gets a lower wage due to the spill-over effect.
• C) Worker C, who is getting $7 an hour working for firm Z, would have otherwise gotten a job with firm X at a wage of $8.
• D) Worker D, who is working for firm M, gets a higher wage due to the threat effect.

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Definitions:

Annuity

A fiscal product designed to emit a stable series of disbursements to an individual, chiefly intended as support for retired people's income.

Perpetuity

A type of annuity that pays an infinite series of cash flows, continuing forever.

Constant Rate

A fixed, unchanging rate at which a specific quantity grows or decays over time.

Compounded Annually

The process of earning interest on both the initial principal and the accumulated interest from previous periods, calculated once per year.