What is collective bargaining? How can it result in higher ...

[melina_rosy]

What is collective bargaining? How can it result in higher unemployment in a country?
 
  What will be an ideal response?

Question 2

Consumption is likely to fall if ________.
 
  A) the number of mortgage defaults in an economy rises
  B) the revenue earned by firms increase
  C) the demand for labor rises
  D) the supply of labor decreases

[stillxalice]

Answer to Question 1

Collective bargaining refers to contract negotiations between an employer and a labor union representing workers. One of the objectives of collective bargaining is to bargain for better wages for workers. As a result, collective bargaining fixes the wage rate above the market clearing level. Once the wages are fixed at a higher level, wage rigidity prevents it from falling. At this higher level of wage, quantity supplied of labor exceeds the quantity demanded of labor and this causes unemployment.

Answer to Question 2

A