Figure 14.12 "Bilateral Monopoly" shows the same monopsony situation in a labor market that was shown in Figure 14.3 "Monopsony Equilibrium"The employer will seek to pay a wage Wm for a quantity of labor Lm The union will seek Wu, the highest wage the employer would be willing to pay for that quantity of labor This wage is found on the MRP curve The model of bilateral monopoly does not tell us the wage that will emerge Whether the final wage will be closer to what the union seeks or closer to what the employer seeks will depend on the bargaining strength of the union and of the employer Unions and the Economy: An Assessment Where unions operate effectively in otherwise competitive markets, they may reduce economic efficiency Efforts to increase demand for American workers through restricting imports or to increase demand for skilled workers by restricting opportunities for unskilled workers almost certainly reduce economic efficiency Artificial restrictions on the supply of labor reduce efficiency as well In each case, the wage gain will increase the cost of producing a good or service and thus shift its supply curve to the left Such efforts, if successful, increase the earnings of union members by creating higher prices and smaller quantities for consumers They may also reduce the profitability of their employers Other attempts by unions to raise wages by increasing the demand for their members are not likely to create inefficiency For example, union efforts to increase worker productivity or to encourage consumers to buy products made by union members not reduce economic efficiency Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 767