The dominant employer in Davis is UCD. Some argue that UCD uses its market power to lower the wages of some of its staff, especially those in lower-skill jobs. Demonstrate how this might work, using an inverse supply of labor of w = 3 + .2L, where L is the number of hours worked per month by the labor force (in thousands), and w is the wage paid, in dollars per hour. Assume UCD's inverse demand for labor is w=18-.1L.
1. Calculate the average expenditure and marginal expenditure for the labor?
2. What are the wage it will offer and the number of hours of work it wishes to hire if UCD chooses to be a monopolist?
3. Discuss what would the union's wage and hours demands be? Since the UCD staffs are unionized, the situation is more likely one of bilateral monopoly.