Labor Economics 6th Edition by George Borjas

تمرين 2

Suppose the union in problem 10-1 has a different utility function. In particular, its utility function is given by
U = ( w w *) × E
where w * is the competitive wage. The marginal utility of a wage increase is still E, but the marginal utility of employment is now w w *. Suppose the competitive wage is $8 per hour. What wage would a monopoly union demand How many workers will be employed under the union contract Contrast your answers to those in the previous problem. Can you explain why they are different