When wage differentials are observed in competitive labour markets, the neoclassical theory of labour markets would predict:
A)market discrimination.
B)a difference in the value of marginal product of labour
C)that wages will converge over time
D)that wage differences reflect social status

Question

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According to neoclassical theory, wage differentials in competitive labour markets result from differences in the value of marginal product of labour. This means that individuals with higher productivity (i.e. higher marginal product) will earn higher wages. Market discrimination (A) implies an unfair allocation of resources based on non-productivity related factors such as race or gender, which goes against the principles of a competitive labour market. While wages may not necessarily converge over time (C), the theory predicts that differences in productivity will persist and continue to drive wage differentials. Social status (D) is not considered a relevant factor in the neoclassical theory of labour markets.

When Wage Differentials Are Observed in Competitive Labour Markets, the Neoclassical