Bigfoot Corp. manufactures shoes in the small town of Here. It is the only employer in town, and Here is too far from anywhere else for townspeople to work elsewhere. Men and women are equally productive; they each produce two pairs of shoes a day, which Bigfoot sells in the perfectly competitive shoe market at a price of $20 per pair. The labor supply curves of men and women respectively are given by

Lm=25wm-250 Lw=50ww-1000

Where wm and ww represent men’s and women’s wage rates.

(a) How many men and how many women will Bigfoot employ, and what wage rates will it pay them, if it wishes to maximize profits?

(b) What would be the socially efficient employment levels and wage rates?

Answer rating: 100% (QA)

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