Suppose the union's objective is to maximize the wage bill and its marginal rate of substitution between employment and

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Suppose The Union S Objective Is To Maximize The Wage Bill And Its Marginal Rate Of Substitution Between Employment And 1 (50.67 KiB) Viewed 17 times

Suppose the union's objective is to maximize the wage bill and its marginal rate of substitution between employment and wage is given by MRSL,w = w/L. (Note union's indifference curves have negative slope, but this text follows the convention of naming MRS as the absolute value of the slope.) Suppose the product price is $9, the marginal revenue product of labour is given by MRPL = 90-4L, and the wage- employment contract will be determined as in the monopoly union model. A. Using the usual economics axes, graph the demand for labour. The slope of this curve is equal to . The absolute value of the slope of the demand curve is B. Write the two equations which a monopoly union's optimal choice must satisfy and then solve for the union's ideal outcome. The union's ideal is to choose wage equal to w₁-$ At this wage the firm will hire units of labour. C. The slope of the union's indifference curve is equal to at the union's optimal choice. At this point, the union's marginal rate of substitution between employment and wage is equal to . At this point the slope of the demand curve is