Final answer:
Unions use indifference curves to illustrate preferences for wage and employment scenarios that provide the same level of satisfaction. When maximizing the wage bill, these curves show trade-offs between wages and employment. For maximizing economic rent, they show combinations that yield the same extra income above what keeps workers in their job.
Step-by-step explanation:
Indifference curves, or iso-utility curves, are used in economics to illustrate all the combinations of goods or scenarios that provide the same level of satisfaction to consumers or entities like labor unions. When drawing these curves for labor unions with specific objectives, they would reflect different preferences.
a) Maximizing the Wage Bill
For a union aiming to maximize the wage bill (the total wages paid to all workers), the indifference curves would likely be shaped to reflect a trade-off between wages and employment. The curves would be downward sloping, steeper on the left (where higher wages but potentially lower employment are preferable) and flatter on the right (where a mixture of reasonable wages and higher employment levels are acceptable). The highest point on an indifference curve would represent the maximum wage bill obtainable given the union's constraints.
b) Maximizing Total Economic Rent
On the other hand, if the union's objective is to maximize total economic rent (the additional income workers receive above what is necessary to keep them in their current job), the indifference curves would again be downward sloping. These would show combinations of wages and employment that provide the same total economic rent, potentially shaped differently based on how the union values job security versus high wages.
It is also important to consider the substitution and income effects when wages change, as these will alter the union's preferences and thus shift or rotate the indifference curves accordingly.