We talked about the taste for discrimination model. Suppose we have a labor market comprised of male and female…

We talked about the taste for discrimination model. Suppose we have a labor market comprised of male and female…

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We talked about the “taste for discrimination” model. Suppose we have a labor market comprised
of male and female employees. In this labor market, some employers are prejudiced against female
workers. The market wage rate for male workers is $22, while the market wage rate for female workers
is $18.50. There are 5,000 women are employed in this labor market.
a. Suppose Firm 1 has a discrimination coefficient of $4. Will Firm 1 hire male workers, female workers,
or both? Why? (2 points)
b. Does Firm 1 pay any costs related to discrimination? If so, what? (4 points)
c. What is the female to male earnings ratio? (2 points)
d. Use the female to male earnings ratio you derived in part c and the fact that 5,000 women are employed
in the labor market to draw a graph of supply and demand for female employees (female to male earnings
ratio and women’s employment will be your equilibrium point). Put female to male earnings ratio on
the Y axis and female employment on the X axis. Assume some firms don’t discriminate. Label the
equilibrium point on your graph. (4 points)
e. Why in the “taste for discrimination” model is it that if we re in perfectly competitive product
market, the discriminating firms will eventually disappear? (3 points) Note: This part can be answered
in a maximum 3 to 4 sentences.

Expert Answer:

Answer rating: 100% (QA)

a Firm 1 will hire both male and female workers but will pay male workers
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