Labor Economics 5th Edition by George Borjas

Exercise 15

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 problem 10-1. Can you explain why they are different
Reference problem 10-1
Suppose the firm's labor demand curve is given by
w = 20 - 0.01 E
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