In what way do competitive markets have a "natural remedy" for discriminatory hiring practices?
A)Federal and state governments naturally step in to resolve problems of discrimination.
B)Profit-maximizing firms that do not discriminate tend to replace firms that discriminate.
C)Wages paid to groups that are victimized by discrimination are eventually bid up to above-equilibrium levels.
D)Discrimination is usually the outcome of rational decision-making processes, and competitive markets produce rational outcomes.

Question

Quizplus · Accepted Answer

In competitive markets, profit-maximizing firms that do not discriminate tend to replace firms that discriminate. Discrimination results in a loss of potential profits for firms as they may overlook qualified candidates solely based on characteristics such as race or gender. This creates an incentive for firms to hire the most qualified candidates, regardless of their background, in order to increase their profits and remain competitive in the market. Therefore, discriminatory firms are naturally replaced by non-discriminatory firms in competitive markets.

In What Way Do Competitive Markets Have a "Natural Remedy