Question
A firm's production function is given by Q = 10 x (EM + EF) 1/2, where EM and EF are the quantities or male and
A firm's production function is given by Q = 10 x (EM + EF) 1/2, where EM and EF are the quantities or male and female employees. Males and females are perfect substitutes. Please note that the marginal product of labor is given by the equation MPE = 5/(EM + EF) 1/2. The firm sells its output for $50. The market wage for males is $25 and the market wage for females is $15. (3 points each) a. How many male workers would the firm hire if the employer does not discriminate? How many female workers would be hired? What are the firm's profits? b. Now consider a firm hat has a discrimination coefficient equal to 1.7. How many male workers would the firm hire? How many female workers would be hired? What are the firm's profits? c. Explain the following statement: "In the taste for discrimination model, discrimination is practiced even though it is costly to do so."
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