The market wage rates for male and female workers are $25 and $10 per worker, respectively. Output
Question:
The market wage rates for male and female workers are $25 and $10 per worker, respectively. Output is given by Q = sqrt(E), so that the marginal product of labor is 1/(2(sqrt(E))), where E is the total number of workers (it doesn’t matter if they’re male or female). The price of output is 100.
a. What are the profit-maximizing levels of employment of male and female workers (how many of each would a nondiscriminatory employer hire)?
b. If an employer discriminates against females with a discrimination coefficient of 0.25, how many male and female workers does the employer hire?
c. If an employer discriminates against females with a discrimination coefficient of 3.0, how many male and female workers does the employer hire?
d. If the only costs to the employer are its labor costs, what are the profits to a non-discriminatory employer? What are the profits of the employer who has a discrimination coefficient of 0.25? What are the profits of the employer who has a discrimination coefficient of 3.0?
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson