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Each employer faces competitive weekly wages of $2,000 for blacks and $2,700 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+ 10 Ew. Every firm sells its output at a constant price of $290 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) What is the value of the marginal product of each black worker?
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c) Describe the employment decision made by firms for which d = 0.20 and d = 0.70 respectively.
d) For what value(s) of d is a firm willing to hire blacks and whites?
