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Each employer faces competitive weekly wages of $1,800 for whites and $1,200 for blacks. Suppose that employers may undervalue the efforts/ skills of blacks in
Each employer faces competitive weekly wages of $1,800 for whites and $1,200 for blacks. Suppose that employers may undervalue the efforts/ skills of blacks in the production process. In particular, every rm is associated with a discrimination coeicient, d, where 0 g d g 1. In particular, although a rm's actual production function is Q = 10(Ew + E3), the rm's manager acts as if its production function is Q = 10Ew + 10(1 d)EB where Ew is white employment and E3 is black employment. Every rms sells its output at a constant price of $200 per unit up to a weekly total of 150 units of output. No rm can sell more than 150 units of output without reducing its price to $0. (a) Describe the employment decision made by rms with d = 0.6. (5 marks) (b) For what value(s) of d is a rm willing to hire both blacks and whites
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