1. Suppose that a union and a firm bargain over wages and the firm unilaterally determines the level of employment.

a) Illustrate the combination of wages and employment that will maximize the union's

utility and label it point A. (No explanation required)

b) Illustrate the combination of wages and employment that will maximize the firm's profits

and label it point B. (No explanation required)

c) Workers can benefit from union bargaining even when the employer is a perfect

competitor in the product market. True, false or uncertain? Explain with reference to your diagram.

2. Suppose that a union and a firm bargain over wages and the firm unilaterally determines the level of employment.

a) Illustrate the combination of wages and employment that will maximize the union's

utility and label it point A. (No explanation required)

b) Illustrate the combination of wages and employment that will maximize the firm's profits

and label it point B. (No explanation required)

c) Union members are better off when the demand curve for the product that their employer

produces is more elastic. True, false or uncertain? Explain with reference to your diagram.