Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 15, Problem 9QP
To determine
Wage difference and wage discrimination.
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Suppose that a Labour Market determines the Quantity of Labour (L) as functions of the wage
rate (w), according to the following Supply and Demand functions:
Supply: L = w
Demand: L=210 - 2w
9. [2 points] What is the free-market wage rate (w*) and Labour quantity (L*)?
Now suppose that the Labour Force forms a union, and collectively bargains to a price floor of
W = $80.
10. [3 points] What would be the Labour Decline and the Unemployment caused by this union
policy?
11. [2 points] Who wins and who loses from this union policy?
Suppose now that this union finds a way to push out the Demand for Labour to reduce this
Labour Decline.
12. [3 points] How much does the union need to increase the Demand function by in order
to reduce this Labour Decline to zero?
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