Suppose that a prejudiced African-American employer has a discrimination coefficient of $5/hour. Suppose also that the market wage rate is $20/hour for African- American workers, and $18/hour for Hispanic workers. In this case, the employer will

Question

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The employer's discrimination coefficient of $5/hour means they perceive the cost of hiring Hispanic workers as $18 + $5 = $23/hour. To be indifferent between hiring African-American workers at $20/hour and Hispanic workers, the perceived cost for Hispanic workers must also be $20/hour, which means their actual wage must fall to $15/hour ($20 - $5).

Suppose That a Prejudiced African-American Employer Has a Discrimination Coefficient