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Profit Maximizing Firms: Discriminatory wage differentials

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Why is it hard to establish whether a group of workers is being discriminated against? Explain how profit-maximizing firms tend to eliminate discriminatory wage differentials. How might a discriminatory wage differential persist?

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Solution Summary

Solution clearly explains why profit maximizing firms tend to eliminate discriminatory wage differentials and why discriminatory wage differential persist.

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As per my understanding your reference/text book is Principles of Microeconomics by N. Gregory Mankiw. It is a very good book.

In general, it is hard to establish whether a group of workers are being discriminated against because there are ...

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