New Hospitals Open
The question
The competitive labor market for registered nurses in the region of Callowmere is in equilibrium, with many hospitals hiring from one shared regional pool of nurses. Three additional hospital systems build facilities in the region and begin hiring from that same pool. Assume the prices hospitals receive for their services, nurse productivity, and the number of people trained and willing to work as nurses are all unchanged. Show the effect on the regional labor market for registered nurses. Show the effect on the Labor Market graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
New Hospitals Open: the worked answer
On the Labor Market graph, Labor demand (DL) shifts right.
Why Labor demand (DL) shifts right
The market demand for labor is the sum of the individual hiring schedules of all firms employing that resource, so the number of employers in the market is a determinant of labor demand. Adding three more hospital systems drawing on the same regional pool raises the total quantity of nurses employers want at every wage, shifting labor demand to the right. Service prices and nurse productivity are unchanged, so each nurse's MRP at a given hospital is unchanged, and the number of people willing to nurse is unchanged, so labor supply stays put.
What happens to the equilibrium
The equilibrium market wage rises and the level of employment increases.
The mistake students make on this one
Students often shift labor supply right here, hearing 'new hospitals' as 'more nursing jobs' and treating jobs as supply. Jobs are positions employers want to fill, which lives on the demand side; labor supply counts PEOPLE willing to work, and the stem freezes that number explicitly.
On exam day
More firms hiring from the same worker pool is the labor-market twin of new sellers entering a product market, except it shifts DEMAND, not supply, so wage and employment both rise.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Labor demand (DL) shifts right and every other curve on the Labor Market graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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