for using the plan that involves paying for fewer hours of labor and using three machines. If management

responds to union demands for higher wages by investing more in machinery, then union workers can be

more productive because they are working with more or better physical capital equipment than the typical

nonunion worker. However, the firm will need to hire fewer workers.

Hours of

Number of

Cost of Labor + Cost of

Cost of Labor + Cost of

Cost of Labor + Cost of

Labor

Machines

Machine $16/hour

Machine $20/hour

Machine $24/hour

30

40

50

3

2

1

$480 + $600 = $1,080

$600 + $600 = $1,200

$720 + $600 = $1,320

$640 + $400 = $1,040

$800 + $400 = $1,200

$960 + $400 = $1,360

$800 + $200 = $1,000

$1,000 + $200 = $1,200

$1,200 + $200 = $1,400

TABLE 14.7 Three Production Choices to Manufacture a Home Exercise Cycle

In some cases, unions have discouraged the use of labor-saving physical capital equipment—out of the
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