Suppose the firm's production function is given by

where Ew and Eb are the number of whites and blacks employed by the firm respectively. It can be shown that the marginal product of labor is then

Suppose the market wage for black workers is $10, the market wage for whites is $20, and the price of each unit of output is $100.
(a) How many workers would a firm hire if it does not discriminate? How much profit does this non-discriminatory firm earn if there are no other costs?
(b) Consider a firm that discriminates against blacks with a discrimination coefficient of .25. How many workers does this firm hire? How much profit does it earn?
(c) Finally, consider a firm that has a discrimination coefficient equal to 1.25. How many workers does this firm hire? How much profit does it earn?

Transcribed Image Text:

q-10,E, E,