In their pursuit of profits, entrepreneurs act in ways that reduce discriminatory wage differentials. There are times, however, when the profit motive is not powerful enough to overcome wage differentials that arise from discrimination. Which of the statements exemplifies one of the most important limits to a competitive market's ability to eliminate discriminatory wage differentials? The Red-Headed League employs only women with red hair. Cuddey Enterprises hires only male employees. The government bans the hiring of workers with brown eyes. Gramps, Inc. will not hire any workers under the age of 40.

C) The government bans the hiring of workers with brown eyes.

Explanation:

A competitive market can eliminate wage differentials if firms are allowed to act in their self-interest without government intervention. However, if the government steps in and declares a ban on the hiring of brown-eyed people, there isn't really anything that firms can do, even if they want to hire people with brown eyes. This situation would effectively lower the brown-eyed workers' wages to zero, because they now are unemployed and banned from finding employment.

The only option firms that still want to hire brown-eyed people is to resort to illegality, and hire people outside government authorization, but this entails risks, and not many companies are likely to take that kind of measure.