Chapter 4.

Let's begin our discussion on recruitment by using a fact pattern from a litigated case. Cone Mills Corporation had several recruiting procedures that gave preferential treatment to applicants who either had family members or friends working for the company. One of these procedures was to give priority to applicants who had family members employed by the company. The other procedure entailed having an unwritten policy that walk-in applicants had to have renewed every two weeks. This created a situation where only those walk-in applicants who had friends or family in the company would renew their applications because they would be the only ones informed of the informal rule, which was not presented in any manual or policy. These recruiting procedures were challenged as being discriminatory towards blacks in general, especially black women because the informal network responsible for recruiting new employees was unavailable to them. The company claimed that the procedures were not designated to be discriminatory, but rather, to construct a loyal family atmosphere within the plant (Lea v. Cone Mills Corp., 3001 F. Supp. 97).

Should employers be able to recruit through employee referrals and word-of-mouth? Does the law allow for such a recruitment technique? What specific restrictions does Title VII place on an employer's ability to recruit and hire? As part of this discussion, refer to the cases of EEOC v. Chicago Miniature Lamp Works and EEOC v. Consolidated Service System in Chapter 4.

Question.

The market inverse demand curve is P(y) = 10 - 2y, and a monopolist's cost curve is y' + 2. (a) What output level y maximizes the monopolist's revenue? What output level y maximizes the monopolist's profit? Identify which of the two output levels is lower, and explain why using economic intuition. (b) Suppose a second firm with cost curve y' + 2 is considering entering the market. If after entry, the firms would compete a la Cournot, what would be the Cournot- Nash equilibrium output levels y and y2 of firms 1 and 2? What would be the equilibrium profits for each firm? Will firm 2 choose to enter the market? (c) Suppose that if firm 2 enters, both firms collude, choosing output levels that maxi- mize total profits and then split the profits equally between them. What would be the profits to each firm? Will firm 2 choose to enter the market in this case?4) A monopolist faces a demand curve given by Do) = 100 - 210. Its cost function is c{y) = 20 + y. a) What is the inverse demand function p['y)? What is its optimal level of output and price? What are the monopolist's prots? 1:) Suppose the monopolist were forced to set p equal to marginal cost. What would y be? What would the monopolist's pIots be? (55 points) The inverse demand function a monopoly faces is P = 100 -Q. The firm's cost curve is TC(Q) = 10 +5Q (a) (4 points) What is the monopolist's marginal revenue curve? (b) (3 points) What is the monopolist's marginal cost curve? (c) (4 points) What level of output maximizes the monopolist's profits? (d) (4 points) What is the price charged by a profit maximizing monopolist? (e) (4 points) How would your answers to parts (a)- (d) change if TC(Q) = 100 + 5Q? (f) (4 points) For what value of fixed costs, does the monopolist break even? (g) (4 points) For what value of fixed costs, would be monopolist find it optimal to shut down in the short-run? (h) (4 points) For what value of fixed costs, would be monopolist find it optimal to shut down in the long-run? (i) (4 points) What is the value of Lerner Index at the profit maximizing level of output