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2. Suppose that in the town of Beckertown, black house painters compete against white house painters and they are equally productive. Some employers have a preference for white house painters; they are willing to pay a price so that they do not have to hire black painters. Other employers do not care whether they hire black or white painters as long as they are equally productive. You have been doing research on this market and you know that the non- discriminating firms can hire up to 100 workers. Number of black painters a. You observe that the wages of blacks, Wb, and whites, Ww, are equal at equilibrium. The graph above shows a demand curve with the quantity of black painters on the x axis and the wage ratio of black workers to white
workers on the y axis. Add in a supply curve which would imply that at equilibrium, black workers earn the same wages as white workers. Label the supply curve, S b. What can we conclude about the number of black painters searching for a job in this town when the wage ratio of blacks to whites is equal to one (meaning wages of blacks are equal to those of whites)? The number of black painters is (circle/bold one) greater than or equal to /less than or equal to (insert a number). c Now assume that black workers in neighboring towns observe that black workers are paid just as much as white workers in Beckertown and so many (more than a hundred) move to Beckertown. Using the supply and demand graph above, show what will happen to the number of black workers and the wage ratio between black and white workers in Beckertown, Label any new demand curve, D, and any new supply curve, S. Explain. The number of black workers in Beckertown will: (circle/bold one) increase, decrease The equilbrium wage of black worker relative to white workers will:( lrelehbold one) increase, decrease
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