1. Suppose a firm faces a fixed price of output, p = 1200. The firm hires workers from a union at a daily wage, w, to produce output according to the production function q = 2E². There are 225 workers in the union. Any union worker who does not work for this firm is guaranteed to find nonunion employment at a wage of $96 per day. a. What is the firm's labor demand function? b. If the firm is allowed to choose w, but then the union decides how many workers to provide (up to 225) at that wage, what wage will the firm set? How many workers will the union provide? What is the firm's output and profit? What is the total income of the 225 union workers? c. Now suppose that the union sets the wage, but the firm decides how many workers to
1. Suppose a firm faces a fixed price of output, p = 1200. The firm hires workers from a union at a daily wage, w, to produce output according to the production function q = 2E². There are 225 workers in the union. Any union worker who does not work for this firm is guaranteed to find nonunion employment at a wage of $96 per day. a. What is the firm's labor demand function? b. If the firm is allowed to choose w, but then the union decides how many workers to provide (up to 225) at that wage, what wage will the firm set? How many workers will the union provide? What is the firm's output and profit? What is the total income of the 225 union workers? c. Now suppose that the union sets the wage, but the firm decides how many workers to
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Hand written solutions are strictly prohibited
![1. Suppose a firm faces a fixed price of output, p = 1200. The firm hires workers from a union at a
daily wage, w, to produce output according to the production function q = 2E2. There are 225
workers in the union. Any union worker who does not work for this firm is guaranteed to find
nonunion employment at a wage of $96 per day.
a. What is the firm's labor demand function?
b.
If the firm is allowed to choose w, but then the union decides how many workers to
provide (up to 225) at that wage, what wage will the firm set? How many workers will
the union provide? What is the firm's output and profit? What is the total income of the
225 union workers?
c. Now suppose that the union sets the wage, but the firm decides how many workers to
hire at that wage (up to 225). What wage will the union set to maximize the total
income of all 225 workers? How many workers will the firm hire? What is the firm's
output and profit? What is the total income of the 225 union workers? [Hint: To
maximize total income of union, take the first order condition with respect to w and set
equal to 0.]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa0787f97-ca65-4e31-a0a4-48398fbbf2b2%2F3129583b-9211-4333-8f09-92217bd52bea%2F4y6sfwb_processed.png&w=3840&q=75)
Transcribed Image Text:1. Suppose a firm faces a fixed price of output, p = 1200. The firm hires workers from a union at a
daily wage, w, to produce output according to the production function q = 2E2. There are 225
workers in the union. Any union worker who does not work for this firm is guaranteed to find
nonunion employment at a wage of $96 per day.
a. What is the firm's labor demand function?
b.
If the firm is allowed to choose w, but then the union decides how many workers to
provide (up to 225) at that wage, what wage will the firm set? How many workers will
the union provide? What is the firm's output and profit? What is the total income of the
225 union workers?
c. Now suppose that the union sets the wage, but the firm decides how many workers to
hire at that wage (up to 225). What wage will the union set to maximize the total
income of all 225 workers? How many workers will the firm hire? What is the firm's
output and profit? What is the total income of the 225 union workers? [Hint: To
maximize total income of union, take the first order condition with respect to w and set
equal to 0.]
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education