1. an upward shift of the horizontal supply curve for these services.
2. a movement along an upward sloping and upward shifting supply curve for these services.
3. an upward shift of the supply curve for these services.
4. a movement along an upward sloping supply curve for these services.
Choose the option that yields the correct answer.
The correct answer is option 4. Since higher and higher wages will be required to get technicians to work longer hours, the cost of producing magnetic resonance scanning services will increase as quantity of those services supplied increases. This will mean that the supply curve of these services will be upward sloping. Since the increase in wages occurs as output expands its effects are incorporated in the movement along the supply curve and do not involve a shift in the curve.
The supply curve would shift upward if the formation of the union increased the wages that have to be paid for normal straight-time use of the technicians. Costs would then increase at all levels of output. Once this new level of the supply curve is established, an expansion of production will require additional hours of technician time that can only be obtained with increasing payments of overtime wages. This latter rise in wages as production expands will cause the supply curve to also become steeper.
More generally, supply curves do not shift in response to changes in costs as output expands, only in response to changes in costs that occur at all levels of output. Changes in costs as output expands involve movements along the supply curve and are reflected in its slope.