Each employer faces competitive weekly wages of $2,000 forblacks and $2,700 for whites. Suppose employers undervalue theefforts/skills of blacks in the production process. In particular,every firm is associated with a discrimination coefficient d, (0 ?d ?1), such that, although a firm’s actual production function isq=10( Eb+Ew ), the firm manager acts as if its production functionis q=10(1?d) Eb+ 10 Ew. Every firm sells its output at a constantprice of $290 per unit up to a weekly total of 150 units of output.No firm can sell more than 150 units of output without reducing itsprice to $0.
a) What is the value of the marginal product of each blackworker?
b) What is the value of the marginal product of each whiteworker?
c) Describe the employment decision made by firms for which d =0.20 and d = 0.70 respectively.
d) For what value(s) of d is a firm willing to hire blacks andwhites?