When wages for doctors increase significantly, it creates an incentive for more individuals to enter the profession. As more individuals enter the labor market to become doctors, the supply of doctors increases.
In a typical supply and demand framework:
- Supply Increases: The increase in the number of doctors entering the labor market shifts the supply curve for doctors to the right.
- Wage Effects: Initially, this might lead to a decrease in wages due to the higher supply of doctors. However, if the demand for doctors remains strong (e.g., due to an aging population, increased healthcare needs, etc.), the wages may stabilize or continue to rise despite the increase in supply.
- Employment Effects: The equilibrium quantity of labor (the number of employed doctors) in the market will likely increase because more individuals will take up positions as doctors.
Based on this analysis, the most accurate response is:
The market equilibrium wage will decrease, and the equilibrium quantity of labor will increase.
(Note: This conclusion assumes that demand for doctors does not increase at the same rate as supply; if demand increases significantly, wages may not decrease as stated. But in many economic scenarios driven by supply increases alone, wages tend to fall while employment rises.)
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