Final answer:
The firm has made not striking in the union's best interest by threatening a lockout, mitigating the union's leverage. Labor unions use strikes to negotiate higher wages, but a lockout can reduce their bargaining power and potentially compel acceptance of the firm's conditions.
Step-by-step explanation:
Union-Firm Negotiations:
By threatening to lockout the workers, the firm has made it in the union's best interest to not strike. This is because a lockout counters the union's strategy of striking, which can otherwise push for higher wages. However, if the firm initiates a lockout, the workers may not have the opportunity to work, and thus, cannot earn wages, which puts pressure on them to accept the firm's conditions.
Labor unions aim to secure better wages and working conditions for workers through collective bargaining. When the union sets a wage, Wu, that is higher than the equilibrium wage, it may lead to a reduction in employment levels (Qd) as firms respond to higher labor costs with less hiring. This could also make firms consider other options such as contracting nonunion labor or relocating operations to areas with less union influence.