4 Suppose a union has so much bargaining power over a firm that the union can set any wage it wants. In addition, suppose the union membership has collectively decided that their objective should be to maximize the total wages received by employed union members from the firm. In other words, suppose that the union decides to maximize the firm’s wage bill.

Assume that the firm’s (inverse) labor demand curve is given by:

where w is the wage received by each employed union member, and L is the total number of union members employed by the firm.