In Figure 10-7, the contract curve is PZ.
(a) Does point P represent the firm or the workers having all of the bargaining power? Does point Z represent the firm or the workers having all of the bargaining power? Explain.
(b) Suppose the union has the power to be a monopoly union in setting wages if it chooses, but it doesn't have the power to force a wage and an employment level on the firm. On what portion of the contract curve PZ would you expect the bargained wage-employment contract to occur?