Problem
The value of marginal product of labor in the steel industry (a "small" industry in the aggregate labor market) is VMP(L) = 1 00,000 - L dollars per year. The competitive wage for the workers with the skills needed in steel production is $30,000 a year, but the industry is unionized, so the workers earn $35,000 a year. The steelworkers' union is a monopoly union. What is the efficiency cost of the union arrangement in this industry to the economy?