Question
1. Suppose a firm's production function is given by q=(L w +L A ) 2 , where L w and L A are the number
1.Suppose a firm's production function is given by q=(Lw+LA)2, where Lw and LA are the number of white and African American workers hired by the firm. Suppose that the market wage of Lw and LA workers is $10 and $8, respectively. Assume that all workers are equally productive and a firm can hire as many workers of each type it wants. The price per unit of the firm's output is $2.
a.How many workers of each type would a nondiscriminatory firm hire?
b.Now suppose the firm engages in employer discrimination and the firm has a discrimination coefficient equal to 0.5. How many workers of each type will the firm hire?
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Understanding Econometrics With Economic Applications
Authors: Dennis Halcoussis
1st Edition
0030348064, 9780030348068
