a.) Determine how much capital and labor the firm should employ given their budget. How much output can they produce? (15)
AMC is currently negotiating with a newly organized union. The firm’s personnel manager indicates that the wage may rise to $22.50 under the proposed contract.
b.) Analyze the effect of the higher union wage on the firm’s use of inputs. By what percentage does the firm’s output change? (15)
c.) Draw out the equilibrium in parts (a) and (b) in separate graphs (label all). (10)
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