Suppose the firms production function

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Reference no: EM131388245

Suppose the firm’s production function is given by: (15) q = 10 x (square root of: Ew + Eb)

It can be shown that the marginal product of labor is then given by: MPe = 5 divided by (square root of: Ew + Eb)

Suppose that the market wage for black workers is $10, the market wage for white workers is $20, and the price of each unit of output is $100.

(a) How many workers would a firm hire if it does not discriminate? How much profit does this nondiscriminatory firm earn if there are no other costs?

(b) Consider a firm that discriminates against blacks with a discrimination coefficient of 0.25. How many workers does this firm hire? How much profit does it earn?

(c) Finally, consider a firm that has a discrimination coefficient equal to 1.25. How many workers does this firm hire? How much profit does it earn?

Reference no: EM131388245

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