a. Assuming that Wal-Mart has market power in a labor market, explain how the firm could use that market power in setting wages.
b. Draw a graph to illustrate how Wal-Mart might use labor market power to set wages.
Figure 18.9 shows Wal-Mart’s situation if it is a
Today, Wal-Mart employs more people—1.7 million—than any other private employer in the world. With size comes power: Wal-Mart’s prices are lower and United Food and Commercial Workers International Union argues that Wal-Mart’s wages are also lower than its competitors. Last year, the workers at a Canadian outlet joined the union and Wal-Mart immediately shut the outlet. But does Wal-Mart behave any worse than its competitors? When it comes to payroll, Wal-Mart’s median hourly wage tracks the national median wage for general merchandise retail jobs