Union wage floor creates labor surplus

Steps:

• Equilibrium occurs where labor demand equals supply at market wage.
• Union raises wage above equilibrium, imposing a binding price floor.
• Firms reduce hiring due to higher costs, decreasing quantity demanded along the demand curve.
• Workers offer more labor at the higher wage, increasing quantity supplied along the supply curve.

Why A is correct:

• Law of demand: higher wage lowers quantity demanded; law of supply: higher wage raises quantity supplied.

Why the others are wrong:

• B: Both rising describes curve shifts (e.g., productivity gains), not the direct effect of a wage floor.
• C: Option not provided, cannot evaluate.
• D: Identical to B, incorrectly suggests both quantities increase.

Final answer: A