Explain the potential impacts of a union relative to a firm's MFC. Be specific and explain the impact to the relationship between MFC / MRP, the competitiveness of the firm, the impact to hiring, etc. Are unions necessary? Why or why not are they both beneficial and hurtful to both the firm and the employees.
Solution:-
Union increases the firm's MFC. This is because union demand higher wages for labor and also good working conditions thus increasing MFC.
As we know MRP is the price of the product times marginal product of labor.Thus if MFC increases price will automatically increase and thus increasing MFC/MRP.
A firm will be less competitive due to a higher cost of production. Hiring will be lesser because of the increased cost of production. Firms will be reluctant to hire.
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