(2) Switching Cost Suppose a firm located in a non-urban location pays a wage of $64/hour. However, it is assumed that there is a 20% chance that workers incur "switching costs" of $24/h. a) what is the expected wage? b) If a firm in an urban cluster wants to match the expected wage (and all else is equal), what should it pay assuming that urban switching cost is only $4 and the chance that switching probability is only 10%.

(2) Switching Cost Suppose a firm located in a non-urban location pays a wage of $64/hour. However, it is assumed that there is a 20% chance that workers incur "switching costs" of $24/h. a) what is the expected wage? b) If a firm in an urban cluster wants to match the expected wage (and all else is equal), what should it pay assuming that urban switching cost is only $4 and the chance that switching probability is only 10%.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 2.1CE

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