Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $12 to $16 per hour.

The following graph shows the labor demand of an individual firm.

On the following graph, show what happens at the firm level as a result of the union

negotiations.

\fGraph Input Tool 24 oWage 12 Rate 20 ( Dollars per Supply hour) 16 Quantity Quantity Demanded Supplied (Thousands of (Thousands 12 WAGE RATE (Dollars per hour) workers) of workers) Excess 8 Supply Shortage Demand (Thousands of (Thousands workers) of workers) 4 0 Demand Shifter 0 10 20 30 40 50 60 QUANTITY OF LABOR (Thousands of workers) Pro-union 0 Advertising (Millions of dollars)