In the Standard Becker Model of Discrimination, Each Firm Is

question 14

Multiple Choice

In the standard Becker model of discrimination, each firm is associated with a discrimination coefficient of d > 0 and acts as if the wage paid to blacks is w_B(1 + d) where w_B is the actual hourly wage paid to blacks. In equilibrium, a threshold level of d, labeled d*, comes about that sorts firms based on hiring decisions. Which of the following is not an outcome of this model, assuming whites and blacks are equally productive?

• A) All firms with d ≠ d* will employ all blacks or all whites.
• B) Profits fall as d increases as long as d < d*.
• C) In the long run, discrimination will be competed away in a competitive labor market.
• D) All discriminating firms hire only white workers.
• E) All firms with d > d* earn the same amount of profit.

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Position Analysis Questionnaire (PAQ)

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