Assume a monopsonistic employer is paying a wage rate of Wm and hiring Qm workers, as indicated in Figure 13.8. Now suppose an industrial union is formed that forces the employer to accept a wage rate of Wc. Explain verbally and graphically why in this instance the higher wage rate will be accompanied by an increase in the number of workers hired . FIGURE 13.8 Bilateral monopoly in the labormarket. A monopsonist seeks to hire Qm workers (whereMRC = MRP) and pay wage rate W corresponding to quantityQm on labor supply curve S. The inclusive union it faces seeks theabove-equilibrium wage rate W. The actual outcome cannot bepredicted by economic theory. It will result from bargaining betweenthe two parties.MRCW.W.aWmD = MRPQ. = Qm QQuantity of laborWage rate (dollars)

The union wage rate Wc turns into the firm's MRC, which would be appeared as a flat line to one side…

Answered: FIGURE 13.8 Bilateral monopoly in the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume a monopsonistic employer is paying a wage rate of W_m and hiring Q_m workers, as indicated in Figure 13.8. Now suppose an industrial union is formed that forces the employer to accept a wage rate of W_c. Explain verbally and graphically why in this instance the higher wage rate will be accompanied by an increase in the number of workers hired .

FIGURE 13.8 Bilateral monopoly in the labor
market. A monopsonist seeks to hire Qm workers (where
MRC = MRP) and pay wage rate W corresponding to quantity
Qm on labor supply curve S. The inclusive union it faces seeks the
above-equilibrium wage rate W. The actual outcome cannot be
predicted by economic theory. It will result from bargaining between
the two parties.
MRC
W.
W.
a
Wm
D = MRP
Q. = Qm Q
Quantity of labor
Wage rate (dollars)

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