Empirical studies suggest that, other things equal, the smaller the number of hospitals in a city, the lower are nurses' wages. This is evidence that
A) the labor markets of nurses are purely competitive.
B) hospitals may possess some degree of monopsony power.
C) the minimum wage does not apply to nurses.
D) labor unions have been ineffective in increasing the wages of nurses.

Question

Quizplus · Accepted Answer

The empirical evidence suggests that the hospitals in a city exert some degree of monopsony power in the labor market for nurses, leading to lower wages. This means that nurses may not have many alternative employment options in the local area, giving hospitals some bargaining power in setting wages. This contradicts the assumption of pure competition in the labor market for nurses (choice A). The minimum wage does not apply to all workers and is not relevant in this context (choice C). The effectiveness of labor unions is not addressed in the evidence presented (choice D).

Empirical Studies Suggest That, Other Things Equal, the Smaller the Number