Which conclusion does the fact that wage differentials continue to exist across different groups of workers lead economists to believe
A)Discrimination is in fact a very large economic problem.
B)Differences in human capital and job characteristics must be important in explaining the differences in wages.
C)Firms apparently are not profit maximizers.
D)The market has failed to properly allocate wages to different workers.

Question

Quizplus · Accepted Answer

The fact that wage differentials persist across different groups of workers suggests that there must be differences in human capital and job characteristics that are important in determining wages. This is because if discrimination were the sole cause of wage differences, we would expect to see all members of a particular group earning lower wages than members of another group, regardless of differences in education, experience, etc. Additionally, the fact that market forces continue to play a role in determining wages (albeit imperfectly) suggests that firms are indeed profit maximizers, and the market is not failing to allocate wages properly.

Which Conclusion Does the Fact That Wage Differentials Continue to Exist