LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 9, Problem 13P
To determine
Determine the number of blacks hired as a function of the wage ratio.
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Imagine a type of discrimination where firms act as if they pay wf+df when they hire a female worker and wm when they hire a male worker. Where df is a discrimination coefficient.
A) If female and male workers were the only inputs, what is the profit function for the firm? What is the firms profit maximizing demand for each type of labour?
B) If the marginal product of male and female workers is the same, and if df = .1, what is the ratio of male to female wages? What does it mean to have a discrimination coefficient of .1? Carefully explain what it means.
Each employer faces competitive weekly wages of $2,000 for whites and $1,400 for blacks. Suppose employers undervalue the efforts/skills of blacks in the production process. In particular, every firm is associated with a discrimination coefficient, d (0 ≤ d ≤ 1). In particular, although a firm’s actual production function is Q = 10(EW + EB), the firm manager acts as if its production function is Q = 10EW + 10(1 - d ) EB . Every firm sells its output at a constant price of $240 per unit up to a weekly total of 150 units of output. No firm can sell more than 150 units of output without reducing its price to $0.a. What is the value of the marginal product of each white worker?b. What is the value of the marginal product of each black worker?c. Describe the employment decision made by firms for which d = 0.2 and d = 0.8 respectively.d. For what value(s) of d is a firm willing to hire blacks and whites?
Assume that the labor supply curve is S(w)=2w-20 and the demand curve is D(w)=40-w. In case of a non-discriminating monopsony, the marginal cost is
MCN(W)=w-10. Note that MCN is the marginal cost in terms of workers. What is the change in the number of workers in the non-discriminating monopsony
compared to perfect discriminating monopsony?
Multiple Choice
O
O
5 decrease in workers
10 decrease in workers
5 increase in workers
10 increase in workers
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