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Economics (AS & A Level) · May / June 2024 · Paper 31 · Question 15

9708Labour market forces and government intervention

The diagram shows what happens when the employees of a profit-maximising monopsonist employer form a trade union and successfully negotiate a wage rate of OW_T. What is the effect of the new wage rate on employment?

  1. AIt falls from OQ_2 to OQ_1.
  2. BIt falls from OQ_2 to OQ_3.
  3. CIt rises from OQ_1 to OQ_3.
  4. DIt rises from OQ_1 to OQ_4.

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Correct answer: C. It rises from OQ_1 to OQ_3.

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