LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 10, Problem 6P
To determine
Identify the number of workers hired by the firm, wage set by the union, output produced by the workers, profit earned by the firm, and total income of 225 union workers.
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Consider a firm that faces a constant per unit price of $1,200 for its output. The firm hires workers, E, from a union at a daily wage of w, to produce output, q, w here q = 2E1/2 Given the production function, the marginal product of labor is 1/E1/2 . There are 225 workers in the union. Any union worker who does not work for the firm can find a nonunion job paying $96 per day. a. What is the firm’s labor demand function? b. If the firm is allowed to specify w and the union is then allowed to provide as many workers as it wants (up to 225) at the daily wage of w, what wage will the firm set? How many workers will the union provide? How much output will be produced? How much profit will the firm earn? What is the total income of the 225 union workers?
true or false Labor unions are organized primarily to help women who are expecting to go into labor while on the job.
Part I: Suppose the firm's labor demand curve is given by:
w = 60 – 0.03E
where w is the hourly wage andE is the level of employment. Suppose also that the union's utility
function is given by:
U = w x E
The marginal utility of the wage for the union is E and the marginal utility of employment is w.
(a) How many workers will be employed under a monopoly union contract?
(b) What wage would a monopoly union demand?
Chapter 10 Solutions
LABOR ECONOMICS
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Major League Baseball players are not eligible for...Ch. 10 - Prob. 15P
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- Which of the following statements is most accurate? Unionization almost always results in improvements to workplace productivity The effects of unionization on productivity are mixed; sometimes it results in an increase and sometimes it results in a decrease Unionization generally has no effect on workplace productivity Unionization almost never results in improvements to workplace productivityarrow_forwardA meeting of representatives for labor and management to negotiate contracts is calledarrow_forwardSuppose the firm’s labor demand curve is given by w = 20 - 0.01E where w is the hourly wage and E is the level of employment. Suppose also that the union’s utility function is given by U = w * E It is easy to show that the marginal utility of the wage for the union is E and the marginal utility of employment is w. What wage would a monopoly union demand? How many workers will be employed under the union contract?arrow_forward
- Question 26 of 30 Consider the labor market for electricians. The demand curve is downward sloping and the supply curve is upward sloping. In this market, however, there is a strong labor union. Assume that the electrician's union is able to negotiate a new contract that substantially raises their member's wages. Select the correct statement. Fewer people want to work as electricians as the union increases wage. Firms hire the same number of electricians at both wages. The wage increase is unambiguously beneficial for all the electricians working before the wage increase. O A consequer of the union negotiating a higher wage is fewer jobs for electricians. 8:25 PM 46°F 12/15/2021 aarrow_forwardSay the average increase in pay for non-union workers in 2011 is 2% across the U.S. If a workers' union successfully negotiates a 3-year collective agreement that provides a 4.5% raise in 2011, and a 4.3% raise in 2013, then the for-profit employer will typically Question 42 options: begin to fire its older union workers. replace union workers with non-union workers. curtail expansion of labor as a trade-off. replace union workers with foreign workers.arrow_forwardSuppose the economy consists of a union and a nonunion sector. The labor demand curve in each sector is given by L = 1,000,000 - 20w. The total (economywide) supply of labor is 1,000,000, and it does not depend upon the wage. All workers are equally skilled and equally suited for work in either sector. A monopoly union sets the wage at $30,000 in the union sector. What is the union wage gap? What is the effect of the union on the wage in the nonunion sector?arrow_forward
- Suppose the union’s resistance curve is summarized by the following data. The union’s initial wage demand is $10 per hour. If a strike occurs, the wage demands change as follows:Length of Strike: Hourly Wage Demanded1 month $92 months 83 months 74 months 65 or more months 5Consider the following changes to the union resistance curve and state whether the proposed change makes a strike more likely to occur, and whether, if a strike occurs, it is a longer strike.a. The drop in the wage demand from $10 to $5 per hour occurs within the span of two months, as opposed to five months.b. The union is willing to moderate its wage demands further after the strike has lasted for six months. In particular, the wage demand keeps dropping to $4 in the sixth…arrow_forwardThe maximum number of workers that a firm would hire isarrow_forwardQUESTION 19 Refer to the following diagram. Wages in both the union and nonunion sectors are initially $10. The union then negotiates a wage rate of $12. The post-negotiation nonunion wage is not yet known. Union $12 $10 S VMP Labor $10 Nonunion VMP Labor The product-market effect would be modeled by shifting the nonunion supply curve to the right, increasing the measured union wage advantage. nonunion demand curve to the right, reducing the measured union wage advantage. Ⓒ union demand curve to the right, increasing the measured union wage advantage. union supply curve to the right, reducing the pure union wage advantage.arrow_forward
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