Question
Suppose an NBA team demands players according to the equation wD = 58 2L, where L is the number of players and w is the
Suppose an NBA team demands players according to the equation wD = 58 2L, where L is the number of players and w is the wage in millions of dollars. The teams production function is described by the equation Q = L. Suppose black players supply labor at a wage of $8 million per year, while white players supply labor at a wage of $40 million per year, so wB = 8 and wW = 40. Assume black and white players are equally productive, meaning they are perfect substitutes in production. Suppose the price of the teams output is $200 million per unit of output, so P = 200.
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f) How much revenue does the team earn if the owner has a discrimination coefficient against blacks of dB = 2.25? (Hint: Revenue = P Q.)
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g) What is the teams labor costs if the owner has a discrimination coefficient against blacks of dB = 2.25? (Hint: Cost = w L, where w is the actual wage, not the perceived wage.)
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