In the wage-setting (WS) and price-setting (PS) model, a reduction in the market power of firms when hiring labor leads to a higher equilibrium real wage solely because workers can now demand higher nominal wages, causing an upward shift in the WS curve.
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In the wage-setting (WS) and price-setting (PS) model, a reduction in the market power of firms when hiring labor leads to a higher equilibrium real wage solely because workers can now demand higher nominal wages, causing an upward shift in the WS curve.