9.1 A fabric mill in rural South Carolina is the only employer in town. The figure below depicts three curves: the mill's value of marginal product of labor VMPL, labor supply, and marginal labor cost MCL. The MLC curve is drawn assuming that worker aren't unionized.

a. If workers don't bargain collectively, the profit-maximizing mill employs__________ Workers per week and pays a weekly wage of $________per worker. Mark this point with A in the figure above.

b. The mill workers unionize and successfully, bargain for a $350 wage. How does this union wage affect the mill's marginal-labor-cost curve? Carefully illustrate the two parts of the new MLC curve.

c. How many workers are employed in the equilibrium with wu + 350? Illustrate the equilibrium with a B in the figure.

d. A ruling by the NLRB limits the mill's ability to operate during a strike, which increases the union's bargaining strength. The union threatens to strike if the mil doesn't raise the weekly wage to $400. The mill concedes. Illustrate the new union equilibrium with a C. How does employment of union workers vary the union wage in this model?

e. Apply this model to predict the effect of a minimum wage in a monopsony labor market.

Assume the minimum wage is less than the wage in the competitive equilibrium

wage ($/worker) MLC Labor Supply 600 500 400 300 200 100 VMP 0 50 100 150 200 250 300 labor (workers/week)