Suppose years of schooling, s, is the only variable that affects earnings. The equations for the weekly salaries of male and female workers are given by:
Wm = 500 + 100s
Wf = 300 + 75s
On average, men have 14 years of schooling and women have 12 years of schooling.
a. What is the average male-female wage differential in the labor market?
b. How much of this wage differential is due to discrimination? Note that there are two possible ways to calculate this, so do it both ways and compare the two answers you get.