Question
You are a monopoly labor union, and D shows the management's demand for labor (n) given the wage payment (w) per employed union worker. You
You are a monopoly labor union, and D shows the management's demand for labor (n) given the wage payment (w) per employed union worker. You bargain with the management by demanding "w" the wage payment per employed union member, and let the management decide on "n" the number of union members to employ. Your objective as the labor union is to maximize the total wage payments (w X n). Calculate w' the wage payment per employee that you should demand in order to maximize (w Xn). 1) Show in the diagram how you determine w and n" that maximizes (w X n) as an application of the so-called MR curve technique so common in any monopoly problem. 2) Show in the diagram how you determine w and n" that maximizes (w X n) by drawing indifference curves consistent with U(w, n) -(w X n) - w n. 3) Show that the above two methods lead to the same answer.
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