View the step-by-step solution to:

Question

This question was created from Homework 10 .pdf https://www.coursehero.com/file/25264574/Homework-10-pdf/

25264574-383573.jpeg
25264574-383573.jpeg

2. (Continued From In-Class Assignment) Consider a firm that hires both white and black
equation
workers. Each group of workers has an identical marginal product curve given by the
MP = 25 - 0.51.
Suppose that the going real wage rate for each group of workers is 15.
What is the optimal level of employment for each group of workers? How much
profit (surplus) does the employment of the black workers add to the firm?
b. Now suppose that the employer develops a prejudice against the black workers.
This prejudice causes the employer to subjectively devalue the productivity of
black workers. The result is that at any given level of employment, the employer
will act as if the marginal product of black workers is 5 units less than it really is.
Assuming the going wage rate for each group remains the same, what is the
optimal level of employment for each group of workers? How much profit does
the employment of black workers add to the firm now?
Illustrate a and b on a graph.
d. How low would the wage of black workers have to fall to keep the employment
of black workers the same as it was originally? How much profit does the
employment of black workers add to the firm now?
e. Given the new wage of black workers, what employment level would a non-
prejudiced employer set? How much profit would this employment of black
workers add to the firm?

Top Answer

a. L = 20 black and 20 white. b.L = 10 black workers. L = 20 white... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question