If a union sets the wage rate to maximize the total wage receipts of its members, the marginal revenue would be
A) zero.
B) negative.
C) positive, but greater than 1.
D) positive, but less than 1.

Question

Quizplus · Accepted Answer

When a union sets the wage rate to maximize total wage receipts, it means the wage is set at a point where any increase in wage would lead to a decrease in employment that is proportionally larger, reducing total wage receipts. This point is where the marginal revenue product of labor equals the wage, and setting the wage higher would mean the additional revenue generated by hiring an additional worker (marginal revenue) would be zero, as the cost (wage) would outweigh the benefit.

If a Union Sets the Wage Rate to Maximize the Total