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An economy experiences two simultaneous shifts: first, a reduction in barriers to entry for new businesses, leading to more firms competing for customers; second, a strengthening of collective bargaining rights, increasing the power of workers in wage negotiations. According to the price-setting model, what is the most likely impact of these combined changes on the typical firm's profit share per worker (σ)?
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An economy experiences two simultaneous shifts: first, a reduction in barriers to entry for new businesses, leading to more firms competing for customers; second, a strengthening of collective bargaining rights, increasing the power of workers in wage negotiations. According to the price-setting model, what is the most likely impact of these combined changes on the typical firm's profit share per worker (σ)?
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