- The marginal cost of labor is the cost to the firm of hiring one more worker. To find the marginal cost of labor, one must divide the change in wage by the change in labor.
- Because the monopsonist is the sole employer in the labor market, it can offer any wage that it wishes. However, the marginal cost of labor will be greater than the wage for any number of workers more than one because hiring more than one worker requires paying a higher wage rate for both the new worker and all previous hires. A monopsony will hire workers up to the point where its demand for labor equals the marginal cost of additional labor.
- Firms have a profit incentive to sell to everyone, regardless of race, ethnicity, religion, or gender.
- A business that needs to hire workers to expand may also find that if it draws only from its accustomed pool of workers—say, white men—it lacks the workers it needs to expand production. Such a business would have an incentive to hire more women and minorities.
- A discriminatory business that is underpaying its workers may find those workers leaving for jobs with another employer who offers better pay. This market pressure could cause the discriminatory business to behave better.
No. The earnings gap does not prove discrimination because it does not compare the wages of men and women in the same job who have the same amounts of education, experience, and productivity.
If a large share of immigrants have relatively low skills, then reducing the number of immigrants would shift the supply curve of low-skill labor back to the left, which would tend to raise the equilibrium wage for low-skill labor.