Suppose that a town has two major hospitals. One of these hospitals is unionized and the union has just negotiated a 10% wage increase each year for the next three years. Which of the following is most likely to occur?

Question

Quizplus · Accepted Answer

As the unionized hospital increases the wages by 10%, it puts pressure on the nonunionized hospital to match the wages, or risk losing employees to the unionized hospital. Therefore, the price of labor is likely to change in both hospitals. Additionally, both hospitals may potentially cut back on other inputs or employment of labor to manage the increased labor cost.

Suppose That a Town Has Two Major Hospitals