Final answer:
Industrialization tends to occur when modern-sector wages result in revenues exceeding production costs, and may lead to more capital-intensive production and higher wages, but also potentially fewer employment opportunities and increased production costs.
Step-by-step explanation:
Industrialization may occur if the modern-sector wage is at a level such that revenues are higher than costs. In situations where management responds to union demands for higher wages by investing more in machinery, production becomes more capital intensive. As a result, union workers may be more productive since they are working with better physical capital equipment. Nevertheless, this shift can lead to a reduction in the number of workers the firm needs to hire.
Additionally, in an increasing cost industry, as the demand for skilled labor rises, wages subsequently increase, leading to higher production costs. This in turn affects the industry supply curve making it more inelastic, indicating that production costs impact the ability of firms to expand output.