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Two economists agree that labor market discrimination against certain workers unfairly leads to lower wages for the disfavored group. economist x argues that government intervention is most likely necessary to eliminate this unfair treatment, while economist y argues that the best solution to the unfair treatment is to let the market work to eliminate it on its own.
Economist A is most likely to be correct when labor and product markets are highly competitive and the lower wages of the disfavored group result from:
A. Discrimination by employers
B. Discrimination by consumers
C. Statistical discrimination

Sagot :

Based on the information provided about labor market discrimination, Economist A is most likely correct as the lower wages of the disfavored group result from statistical discrimination. (Option C)

According to classical economists assumption that if a market is competitive and free from government control, no labor market discrimination based on non-economic traits like gender, race, should exist. An employer or consumer in such a situation who discriminates will suffer economically. Hence, economist B assumes the free market and competition will be enough to solve the problem of unfair discrimination. However, economist A realizes that information is not readily available which can lead to the discriminated group to have lower wages, which is known as statistical discrimination i.e., when an employer or consumer makes decisions on a group with imperfect information by looking at the statistical history of that group.  Statistical discrimination occurs when employers have incomplete information about workers' productivity and use aggregate statistics to make their decisions. Companies don’t have perfect information and consider group past stats of productivity. Hence employers who use the statistical history of their productivity to price their wages will likely price them lower than their potential.

Learn more about Statistical discrimination:

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