Question: a. Table 10-2 contains hypothetical labor supply and demand data for the widget industry. What are the competitive equilibrium wage rate and employment levels?

b. Suppose the labor market is initially in equilibrium. Suppose the United Widget Workers successfully organizes workers in the industry and may strike for a Wage increase from the current equilibrium wage. What is the "cost" (in terms of employment) to the union of each $1 increase in the wage rate?

c. If the wage rate is such that Qd < Qs, then there is an excess (demand/supply) of labor; How much labor will be employed? Explain. If the wage rate is such that Qd > Qs, then there is an excess (demand/supply) of labor. How much labor will be employed? For the given labor demand and labor supply, at which wage rate will employment be maximized? Is it "realistic" for the‘ union to pursue a strategy of trying to maximize employment? Explain.

d. The union is considering an alternative strategy. Suppose it seeks a wage rate which will maximize the wage bill, which is simply the wage rate multiplied by the quantity of labor employed. For each wage rate, calculate the resulting wage bill. In this example, when is the wage bill maximized? Would the union’s strategy lead any union members to lose their jobs, and if so, how many? Explain.

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