Question: In the competitive electrical motor industry, the workers at Galt Inc. threaten to go on strike. To avoid the strike, Galt Inc. agrees to pay its workers more. At all other factories, the wage remains the same.
a. What does this do to the marginal cost curve at Galt Inc.? Does it rise, does it fall, or is there no change? Illustrate your answer in the figure.
b. What will happen to the number of motors produced by Galt Inc.? Indicate the "before" and "after" levels of output on the x-axis in the figure.
c. In this competitive market, what will the Galt Inc. labor agreement do to the price of motors?
d. Surely, more workers will want to work at Galt Inc. now that it pays higher wages. Will more workers actually work at Galt Inc. after the labor agreement is struck? Why or why not?