Look back at Figure 2 In the union sector, the unions ability to raise wages from Wn to Wu decreases total employment from N 1 to N 2 Thus N 1 N 2 workers are displaced from the union sector and will seek employment in the nonunion sector But suppose that wages in the nonunion sector cannot fall (p...

Look back at Figure 2. In the union sector, the unions ability to raise wages from Wn

Question:

Look back at Figure 2. In the union sector, the union’s ability to raise wages from Wn to Wu

decreases total employment from N₁ to N₂. Thus N₁ – N₂workers are displaced from the union sector and will seek employment in the nonunion sector. But suppose that wages in the nonunion sector cannot fall (perhaps because of a minimum wage law). Suppose, more specifically, that they are fixed at Wn in the nonunion sector. If union and the nonunion sectors are the only two sectors in the economy, how many workers will become unemployed because of the union’s ability to raise wages in the union sector?

a. N₁.

b. N₂.

c. N₃.

d. N₁– N₂.

e. N₁ + N₂.