In the main Kodak-Fuji model of Sections 4.3 to 4.6, we have assumed that the marginal cost of producing film is $4. Suppose that this marginal cost arises because each roll of film requires 1 hour of unskilled labor to produce, and the market wage for unskilled labor is $4 per hour. Suppose that this market wage is unaffected by whatever happens in the film industry, and that workers can easily find a job in the other industries at that wage.
(a) If Kodak simply pays its workers their opportunity wage of $4 per hour, then do Kodak workers benefit from, lose from, or remain indifferent to the opening of trade in the film industry?
(b) Now, suppose that Kodak workers are unionized, so that in addition to receiving their opportunity wage they bargain to receive a fraction of the economic rents the company generates. Assume for simplicity that the existence of the union does not affect the firm's output and pricing decisions.5 Will your answer to the question in (a) be different?
(c) Consider the political incentives of Kodak workers to support or oppose free trade in film. Will those political incentives be more closely aligned with the political incentives of management if the workers are unionized or if they are not unionized? Explain.