Suppose that a union and a firm bargain over wages and the firm unilaterally determines the level

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Question:

Suppose that a union and a firm bargain over wages and the firm unilaterally determines the level of employment.

a. Illustrate the combination of wages and employment that will maximize the union's utility and label it point A. (No explanation required)

b. Illustrate the combination of wages and employment that will maximize the firm's profits and label it point B. (No explanation required)

c. Illustrate the case of a bargained outcome where neither the firm nor the union gets its first choice. Label this point C. (No explanation required)

d. Is this bargaining outcome Pareto efficient? Explain and illustrate your answer in your diagram.

e. Workers can benefit from union bargaining even when the employer is a perfect competitor in the product market. True, false or uncertain? Explain with reference to your diagram.

f. All bargaining outcomes that lie on the demand curve are Pareto inefficient. True, false or uncertain? Explain with reference to your diagram.

g. Union members are better off when the demand curve for the product that their employer produces is more elastic. True, false or uncertain? Explain with reference to your diagram.