Question

Question 2 of 4

Use decimals if needed, not fractions. Do not round at all (without rounding, truncate final answer after three decimal places if needed).

Suppose the demand for union representation is given by R^D=240-4p and the supply of union representation is L^S=2p.

A. Graph the supply and demand for union representation. If union membership is free, the maximum number of workers who would want a union is _______ . If union fees are above $ _______ , zero workers would want to join. In equilibrium, _______ workers will choose to be represented by a union and the fee for being represented by a union will be $ _______ per member.

B. Suppose the government introduces right-to work laws such that workers may receive the benefits of union representation without paying the fees. Some workers who formerly had some willingness to pay for union representation now prefer to be "free riders" on the union services paid by others, and are no longer willing to pay so the demand curve shifts as the aggregate willingness to pay of workers decreases. Suppose the new demand curve is given by L^D=180-4p. Draw this change on your graph. We can interpret this as meaning _________ workers have withdrawn their demand for union representation. As a result, union membership costs $ _______ per worker and _________ workers will choose to be union members.

C. The size of the union ________ (increases/decreases/stays the same) as a result of right-to work laws. The union's total revenue from membership ________ (increases/decreases/stays the same) by $ ________ after the right-to-work laws are introduced.

Answer 1