Figure 14.3
A labor union is exercising monopoly power in the labor market.
-Refer to Figure 14.3. To maximize total wages paid to workers, the labor union will agree to wage rate:

Question

Quizplus · Accepted Answer

The labor union will choose the wage rate where marginal revenue product (MRP) equals the marginal cost of labor (MCL). In this case, that occurs at point E where MRP = MCL. At point E, the wage rate is W₂. This wage rate will maximize total wages paid to workers.

Figure 14.3 A Labor Union Is Exercising Monopoly Power in the Labor