Question

In the standard Becker model of discrimination, each firm is associated with a discrimination coefficient of d > 0 and acts as if the wage paid to blacks is wB(1 + d) where wB is the actual hourly wage paid to blacks. Assume whites and blacks are equally productive. The going wage for whites is $18 per hour while the going wage for blacks is $10 per hour. Which of the following will characterize the labor market equilibrium when some employers have discriminatory preferences against hiring black workers?

A) All discriminating employers will hire only white workers.

B) An employer with a discrimination coefficient of 0.8 will hire only white workers.

C) An employer with a discrimination coefficient of 0.9 will hire only black workers.

D) An employer with a discrimination coefficient of 0.6 will hire only black workers.

E) Any employer with a positive discrimination coefficient will hire only white workers

Answer 1

Answer option D)

hire those workers, for which wages are lower , A is false

So effective wages paid to black, = wB'= 10*(1+d)

B) d = .8, wB'= 18 = Ww

So Hire any combination of black & white workers

False

.

C) d = .9, wB'= 10*1.9= 19 > wages of white Ww

So Hire only white workers

C is false

.

D) d = .6, wB'= 16, < Ww

Hire only black workers