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In: Economics

Suppose General Motors demands labor according to the labor demand function ? = 40 − 0.5?,...

Suppose General Motors demands labor according to the labor demand function ? = 40 − 0.5?, where ? is the hourly wage and ? is the number of employees. The United Auto Workers Union has a utility function given by ? = ? ∗ ?.

a. In 1984, the United Auto Workers Union started negotiations with General Motors by assuming that they were a monopoly union. Find the wage and employment demands that the United Auto Workers Union would have demanded before any bargaining began.

b. If General Motors and the United Auto Workers Union both had excellent bargaining representatives, would this be the final labor contract? If not, then explain in words and graphically where they would end up after the bargaining process.

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Rahul Sunny answered 1 year ago
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