Question
Please need help i am doing paper and dont have enought time to meet deadline
Under shaft Industries is a monopolist. The following graph shows the labor supply curve it faces (labeled "S"), its marginal revenue product curve (labeled "MRP"), and its marginal factor cost curve (labeled "MFC"). Under shaft faces an upward-sloping labor supply curve. Therefore, its marginal factor cost (MFC) curve is its labor supply curve. If Under shaft's workforce is not unionized, Under shaft will hire workers and pay them per hour. Suppose Under shaft Industries' work force is unionized. The union is trying to decide what wage to ask for. If it wants to maximize the number of employees that will be hired (that is, the number of employees that will be offered a job and accept it), it should ask for a wage of per hour. You know in general that unions face a tradeoff between wages and employment. This tradeoff when the employer is a monophony. Consider a tropical island economy with only two sectors: souvenir manufacturing and hospitality (hotels). Both sectors are perfectly competitive, and workers are equally able and willing to work in either industry. Only foreign tourists demand souvenirs and hotel stays, so changes in the domestic labor market do not affect the product demand curve in either sector. Suppose a union forms in the souvenir manufacturing industry. The union limits its membership to less than the number of workers employed before the union formed and forces all employers in the industry to hire only union workers. Show the effect of unionization in the souvenir industry on the labor market for souvenir manufacturers. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther. Now show the effect of unionization in the souvenir industry on the labor market for hospitality workers. Summarize your findings in the following table.
Explanation / Answer
First question is answered below.
Undershaft faces an upward sloping labor supply curve. Therefore, its MFC curve is to the left its supply curve.
If Undershaft’s workforce is not unionized, Undershaft will hire 30 workers and ay them $8 per hour (point of intersection of SS and MRP curves)
Suppose Undershaft workforce is unionized. It should ask for a wage of $10 per hour.
This tradeoff decreases when employer is a monopsony.
