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At the competitive wage of $20 per hour, firms A and B both hire 5,000 fulltime...

At the competitive wage of $20 per hour, firms A and B both hire 5,000 fulltime workers (2,000 hours per year). The elasticity of demand for firm A is -2.5 and the elasticity of demand for firm B is -0.75. Workers at both firms unionize and negotiate a 12 percent wage increase.

a.What is the effect on employment at firm A? How has total worker income changed?

b.What is the effect on employment at firm B? How has total worker income changed?

c.How much would the workers at each firm be willing to pay in annual union dues in order to unionize (and receive the 12 percent wage increase)?

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Rahul Sunny answered 1 year ago
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