If a union sets the wage rate to maximize the total wage receipts of its members, the price elasticity of demand for labor would be
A) zero.
B) numerically equal to 1.
C) finite, but greater than -1.
D) positive, but less than 1.

Question

Quizplus · Accepted Answer

To maximize total wage receipts, the union would set the wage rate at a point where the price elasticity of demand for labor is numerically equal to 1. This is because at an elasticity of 1, any increase in wage rate would lead to a proportional decrease in quantity demanded, leaving total revenue (wage receipts) unchanged.

If a Union Sets the Wage Rate to Maximize the Total