Though unions can negotiate pay increases for their members, their actions can h

Question

Though unions can negotiate pay increases for their members, their actions can have unintended consequences for workers. Identify all such possible ones from the list below. It is possible that there is more than one correct answer. Firms could possibly respond to unions' demands for higher wages by hiring fewer workers. Firms could possibly respond to unions' demands for higher wages by substituting capital for labor Unions always drive down firms' profits. Higher rates of union membership always diminish aggregate levels of economic output.

Explanation / Answer

By resorting to first two options, firms try to negate the effect of wage increase which adversely affects the labor force.

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