Assume a professional sports league has two teams (for simplicity). Team A has some prejudice against minority players, while Team B does not. Team A has a discrimination coefficient that increases as it employs more minority players, written as: dM = 0.01EM where EM is the number of minority players the team hires. The teams face competitive wages of wW = $150 for non-minority players and wM = $100 for minority players. Lastly, assume each team must employ 200 players. Minority and non-minority players are equally productive.

(a) How many minority players and non-minority players will Team A employ? How many minority players and non-minority players Team B hire? Explain.

(b) Both teams generate identical amount of revenue and the only operating costs are labor (player) costs. Compare (calculate) the profits of Team A and Team B.

(c) Do you expect that the hiring situation described in part a) to be sustainable in the long run? If so, explain why. If not, explain why not.