Suppose there are two types of basketball playersblack and white. Suppose also that, on average, black players
Question:
(i) Good teams
(ii) Bad teams
a. As shown in the figures, the wage paid by good teams is higher than the wage paid by bad teams. What explains this wage differential?
b. Do black players earn more or less than white players, on average? Explain.
c. Now suppose the good teams discriminate against white playersrightly or wrongly they believe that black players are better than white players. Show in your diagram what happens in both labour markets.
d. In the situation in part (c), what happens to the wage differential between good and bad teams?
e. In the situation in part (c), what happens to the average black-white wage differential?
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Related Book For
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
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