Describe the employment decision

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Each employer faces competitive weekly wages of $1,600 for blacks and $2,400 for whites. Suppose employers undervalue the efforts/skills of blacks in the production process. In particular, every firm is associated with a discrimination coefficient d, (0 ≤ d ≤1), such that, although a firm's actual production function is q=10(Eb+Ew), the firm manager acts as if its production function is q=10(1−d)Eb+10Ew. Every firm sells its output at a constant price of $280 per unit up to a weekly total of 150 units of output. No firm can sell more than 150 units of output without reducing its price to $0.

a) Describe the employment decision, output level and profits made by firms for which d = 0.25 and d = 0.75 respectively.

b) For what value(s) of d is a firm willing to hire blacks and whites?

Reference no: EM131115841

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