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Consider an economy with two labour markets, neither of which is unionized. Now suppose a union is established in one market. a. Show the effect
Consider an economy with two labour markets, neither of which is unionized. Now suppose a union is established in one market.
a. Show the effect of the union on the market in which it is formed. In what sense is the quantity of labour employed in this market an inefficient quantity?
b. Show the effect of the union on the nonunionized market. What happens to the equilibrium wage in this market?
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