Question: 4. Suppose that a firm's production function is given by: 9 = 8 nw + no where nw represents the number of white workers and


4. Suppose that a firm's production function is given by: 9 = 8 nw + no where nw represents the number of white workers and no the number of black workers at the firm (so black and white workers are perfect substitutes for the firm). It can be shown that the marginal product of labor is then equal to: 4 MPL = nw + no Suppose that the market wage for black workers is $10, the market wage for whites is $15, and the price of output is $100. Firms can hire partial workers if needed for the solution. a. How many workers would a firm hire if it does not discriminate? What is the level of profits for this nondiscriminatory firm? What is the racial composition of the employees at this firm? b. Let's consider the hiring practices of a firm that discriminates against blacks and has a discrimination coefficient of d=0.5 (see the notes for what d means). How many workers will this firm hire and what will be the level of profits? What is the racial composition of the employees at this firm? c. Finally, consider a firm that has a discrimination coefficient of d=0.9. How many workers would this firm hire, and what would be its level of profits? What is the racial composition of the employees at this firm
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