Labor Economics 5th Edition by George Borjas

Exercise 9

At the competitive wage of $20 per hour, firms A and B both hire 5,000 workers (each working 2,000 hours per year). The elasticity of demand is 2.5 and 0.75 at firms A and B respectively. Workers at both firms then unionize and negotiate a 12 percent wage increase.
(a) What is the employment effect at firm A How has total worker income changed
(b) What is the employment effect at firm B How has total worker income changed
(c) How much would the workers at each firm be willing to pay in annual union dues to achieve the 12 percent gain in wages