Question

Suppose the Marginal Revenue Product for green-eyed employees is

MRPG=23−0.75GMRPG=23-0.75G

Where G=the number of green-eyed workers and MRP is measured in dollars per hour. The going wage for a green-eyed worker is $8, but employer X discriminates against these workers and has a discrimination coefficient, D, of $1.50 per hour.

How many fewer green-eyed workers does employer X hire due to discrimination than would have been hired without discrimination?

Answer 1

The labor market equilibrium with discrimination is

The market equilibrium without discrimination is

Therefore, the employer hires 2 fewer green eyed workers with discrimination.