Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S₀ to S₁ and demand shifts from D₀ to D₁, then
A)wages will have to rise to $60 to avoid a nursing shortage.
B)wages will have to rise to $50 to avoid a nursing shortage.
C)a wage of $40 will be sufficient to achieve equilibrium.
D)a wage of $50 will lead to an excess supply of nurses.

Question

Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive.  If supply shifts from S₀ to S₁ and demand shifts from D₀ to D₁, then
A)wages will have to rise to $60 to avoid a nursing shortage. 
B)wages will have to rise to $50 to avoid a nursing shortage. 
C)a wage of $40 will be sufficient to achieve equilibrium. 
D)a wage of $50 will lead to an excess supply of nurses.

Quizplus · Accepted Answer

The two shifts here would cause an increase in the equilibrium wage to $60. If the wage did not increase to that figure, a shortage would result.

Assume That the Graph Below Describes the Current Labor Market