Today, Wal-Mart employs more people - 1.7 million - than any other private employer, and by this measure is not just the largest company in the world but the largest company in history of the world. With size comes power. The Wal-Mart effect drives down consumer prices, and some argue it also drives down wages and benefits. a. Assuming that Wal-Mart has market power in labor markets.

Explain how the firm could use that market power in setting wages.