What role might discrimination play in accounting for income inequality?
What will be an ideal response?
If the levels of VMP of labor for a racial group or one sex are perceived to be higher than that of another racial group or the other sex, then the equilibrium wages earned will vary across these groups, despite the fact that the two groups have equal ability. Economists disagree to the extent that discrimination pervades the labor market. One line of reasoning states that those firms that practice race or sex discrimination in the labor market face higher production costs (pay higher wages for the same value of marginal product) than those firms that do not. If this line of reasoning is correct, the profit margins for the firms practicing discrimination will be lower and the market price of their goods and services would be higher than non-discriminating firms. Either way, the market pressures increase the opportunity cost to firms (and the consumers who buy their goods) for practicing race or sex discrimination, eventually eliminating these practices.
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An increase in the price of labor will, in the short-run, cause a competitive firm's
a. marginal cost to increase, the quantity it sells to decrease and therefore reduce the quantity demand of labor. b. price of its output to increase, leaving demand for labor unchanged. c. marginal revenue product of labor to decrease and therefore reduce demand for labor. d. marginal revenue product of labor to increase and therefore increase demand for labor.
If oranges sell for $100 per crate in the United States and 4000 pesos per crate in Mexico, the law of one price indicates that you should be able to exchange $1 for
A) 0.025 peso. B) 4 pesos. C) 40 pesos. D) 400 pesos.
By definition, total production must always equal total
a. sales. b. demand. c. purchases. d. income.
According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size
a. True b. False Indicate whether the statement is true or false