Explanation:

Business Cartel allows firms to exercise greater market power by the nature of collusion, and thus increase markup. This shifts down the price setting curve, causing it to intersect the wage setting curve at a higher unemployment level. Obviously, a. and b. are not correct because they only affects unemployment in the short run. Note that d is also not correct. It is important to understand that in the context of the model covered in class, Labor Union cannot affect real wage, and this is by the nature of the price setting curve. No matter how hard labor union try to negotiate a higher nominal wage; firm can just respond by setting the price at (1+m) multiple of the wage. Higher nominal wage do benefit workers as long as price is fixed; but as soon as we allow price to change, this gain disappears. On the other, hand labor union does affect the wage setting curve. By holding out, less are working (higher unemployment), at any given real wage. Weakening labor would of course have the opposite effect, corresponding to a decrease in z, and leftward shift in wage setting curve.