Final answer:
In a free market, discrimination is generally discouraged due to competition, as firms that discriminate may lose out on potential customers and skilled workers. However, persistent societal attitudes towards discrimination can still influence business practices and may override the pressure of market forces. The marginal cost of labor is different in competitive markets versus monopsonies due to the market power held by firms in the latter scenario.
Step-by-step explanation:
Will a free market tend to encourage or discourage discrimination? In a free market, discrimination tends to be discouraged due to competition. In competition, firms that discriminate might lose potential customers and miss out on the most productive workers, which can be detrimental to their profits. For example, consider a local flower delivery business that is hesitant to serve a diverse clientele; by yielding to discriminatory practices, this business misses out on a wider customer base and potential revenue. On the other hand, businesses that embrace non-discriminatory practices can benefit from a diverse range of talents and a broader market reach. However, despite the competitive pressures, discrimination may persist in a free market due to underlying societal attitudes and prejudices that can influence managers, workers, and customers. These societal norms can create an environment where treating minority groups fairly could hurt the morale of prejudiced co-workers or drive away customers with strong discriminatory attitudes, potentially reducing a firm's profits. Market forces alone may not be strong enough to overcome such societal attitudes.
Looking at the labor market, the marginal cost of labor (MCL) for a firm in a competitive labor market is the additional cost of hiring one more employee, taking into account the wage rate and the change in the quantity of labor. In a monopsony, where there is only one buyer of labor, the MCL is higher because the firm has to increase wages to attract additional workers, impacting all the workers' wages. This difference is due to the firm's market power in determining wages in a monopsonistic environment compared to the wage-taker scenario in a competitive labor market.