Scenario 19-3
Ethan works for the local piano moving company part time after school.Ethan has worked on the job for a couple of years but still hasn't received a wage increase even though newer employees have received raises.Ethan has threatened his employer with a lawsuit if he doesn't get a raise in the next few weeks.Ethan believes he is a victim of labour-market discrimination.
-Refer to Scenario 19-3.Why might an economist be skeptical of Ethan's discrimination complaint
A)Market equilibrium will eliminate discrimination.
B)In a competitive market, employers pay employees based on their value to the firm.
C)Only profit maximizers practice discrimination.
D)Only cost minimizers practice discrimination.

Question

Quizplus · Accepted Answer

Economists would be skeptical of Ethan's discrimination complaint because in a competitive labor market, employers pay employees based on their value to the firm, regardless of personal characteristics such as age or length of employment. This means that Ethan's lack of a wage increase may be due to him not adding enough value to the firm to merit a raise, rather than being a victim of discrimination. Market equilibrium will also eliminate discrimination as it becomes costly for firms to discriminate against certain groups of employees. The statements in choices C and D are incorrect as discrimination can be practiced by both profit maximizers and cost minimizers.

Scenario 19-3 Ethan Works for the Local Piano Moving Company Part Time