By Frank H. Stephen

ISBN-10: 1349062480

ISBN-13: 9781349062485

ISBN-10: 1349062502

ISBN-13: 9781349062508

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**Sample text**

E. h/u. = pfh. J JY Let a .. h/U. h/U. e. h/U. /H) 1. ~ Thus a .. h/U. e. he gets the same satisfaction from a given income/hours trade-off for another as he would if he were in that position.

If the union has no preference for employment, the indifference curves are horizontal and the union will seek to maximise y, just like the W-V-M firm. Thus, where unions are sufficiently strong to determine the wage rate and allow firms to adjust labour and capital so as to meet fixed costs, the capitalist firm's behaviour will be identical to that of the W-V-M firm (see also Greenwald, 1979). This presents an interesting hypothesis for testing in industries with very strong unions. MODIFICATIONS OF THE BASIC MODEL 45 Returning now to the case of the utility maximising labour-managed firm, how does it respond to changes in parametric prices?

This is illustrated in Figure 2. 7, in which AB is the relevant portion of the total revenue curve. With capital stock fixed in the short run at K, the firm has fixed costs of rK shown by the distance OC on the vertical axis. e. pX - rK) to the labour force. This is equivalent to maximising the slope of a line from C passing through AB. e. when the labour force is 1 1 , at which the slope of CD (the dividend) is equal to the slope of AB (the marginal product of labour). e. an increase in v) shown by the shift of the total revenue curve to A'B'.

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