Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question #1 (30 points) At the competitive wage of $30 per hour, firms A and B both hire 3,000 workers (each working 1,000 hours).
Question #1 (30 points) At the competitive wage of $30 per hour, firms A and B both hire 3,000 workers (each working 1,000 hours). The elasticity of demand is -3.0 and -0.5 at firms A and B respectively. Workers at both firms then unionize and negotiate a 15 percent wage increase. (a) What is the employment effect at firm A? (b) How has the total worker income changed for firm A? (c) What is the employment effect at firm B? (d) How has the total worker income changed for firm B? (e) How much would the workers at each firm be willing to pay in annual union dues to achieve the 15% gain in wages? Assume that reductions in employment come from reducing the number of workers hired, and not by reducing the number of hours worked by each worker. (f) Is firm A's union or firm B's union likely to face more criticism from the workers? Provide a reason.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started