Under which circumstance might a competitive market be consistent with a discriminatory wage differential
A)The wage differential can be explained by customers' discriminatory preferences.
B)The wage differential can be explained by a compensating differential.
C)The wage differential can be explained by differences in human capital.
D)The wage differential can be explained by differences in efficiency wages.

Question

Quizplus · Accepted Answer

In a competitive market, wages should be determined by supply and demand for labor, and any wage differential should reflect differences in productivity. However, if customers have discriminatory preferences, and are willing to pay more for services provided by certain groups of workers, then firms may be able to charge a higher price for those services, and pass some of the surplus on to workers in the form of higher wages. In this case, the discriminatory wage differential would be consistent with a competitive market.

Under Which Circumstance Might a Competitive Market Be Consistent with a Discriminatory