How can discrimination be viewed as resulting from a preference or taste for which the prejudiced employer is willing to pay? What will determine whether the prejudiced employer hires non preferred workers in this model?
What will be an ideal response?
The economic analysis of discrimination provides some insights even though the issue is complex and multifaceted. The taste-for-discrimination model explains prejudice using demand theory. The model assumes that a prejudiced employer is willing to pay a “price” to avoid interactions with a non preferred group. The discrimination coefficient measures in monetary units the cost of the employer’s prejudice. An employer will only hire non preferred workers if their wage rate is below that of the preferred workers by an amount at least equal to the discrimination coefficient.
In a model of the supply and demand for non preferred workers, an increase in prejudice of employers will decrease the demand for this labor, the number of workers, and their wage rate. A decrease in the prejudice of employers will increase the demand for this labor, the number employed, and the wage rate.
The taste-for-discrimination model suggests that in the very long-run competition will reduce discrimination, but critics question this conclusion given the insufficient progress in reducing discrimination over time in the United States.
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The fact that returns from the stock market are less volatile over long-periods of time suggests that:
A. stock market bubbles have become more common. B. stock markets are efficient. C. people get comfortable with the stocks they own. D. investors are more risk averse over the longrun.
Which of the following is a common barrier to entry in a monopoly market?
A. Economic profits greater than zero for the monopolist. B. A vertical supply curve. C. A patent on a new product. D. A rising long-run average total cost curve.
The Global South provides college educations to a large fraction of their populations.
Answer the following statement true (T) or false (F)
Which of the following is a possible solution to the adverse selection problem?
a. Screening b. Signaling c. All of the above d. None of the above