A firms production function is given by Q = 10 x (EM + EF)1/2, where EM and EF a
ID: 1188142 • Letter: A
Question
A firms production function is given by Q = 10 x (EM + EF)1/2, where EM and EF
are the quantities or male and female employees. Males and females are perfect
substitutes. Please note that the marginal product of labor is given by the
equation MPE = 5/(EM + EF)1/2. The firm sells its output for $50. The market
wage for males is $25 and the market wage for females is $15.
How many male workers would the firm hire if the employer did not
discriminate? How many female workers would be hired? What are the
firm’s profits?
Explanation / Answer
a)
since wage of females is less than males...profit maximizing firm willonly hire females
No of male workers = 0
it will hire female workers untill their wage is equalto marginal product
femaleworkers wage = p* MPE = 50 * 5/sqrt(EF) = 15
EF = 278 workers
Q= 10 * sqrt(278) = 167 units
profit = 50 * 167 - 278 * 15 = 4180
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