8. Information Asymmetry (lemons' market) In some industries it is very difficult to monitor the performance of individual workers. In others it is quite easy. Let us consider an industry in which monitoring is difficult. There are two kinds of workers: some are "capables" and some are "klutzes." Half of all workers in the labor force are capables and half are klutzes. A capable will produce $1600 of output per week for his employer. A klutz will produce only $400 of output per week. Capables and klutzes look and talk just the same. Capables know they are capable and klutzes know that they. are klutzes. But if you ask, everybody will claim to be capable. Both capables and klutzes have the option of taking a job in another industry where performance can be closely monitored. In the other industry where monitoring the performance of individual workers is easy, capable workers could earn $700 per week and klutzes could earn only $200 per week. a) In the industry where monitoring is difficult, suppose that a firm has the pessimistic belief that the only workers it can hire are klutzes. What is the highest wage that this firm would be willing to pay per week to hire a worker?

8. Information Asymmetry (lemons' market) In some industries it is very difficult to monitor the performance of individual workers. In others it is quite easy. Let us consider an industry in which monitoring is difficult. There are two kinds of workers: some are "capables" and some are "klutzes." Half of all workers in the labor force are capables and half are klutzes. A capable will produce $1600 of output per week for his employer. A klutz will produce only $400 of output per week. Capables and klutzes look and talk just the same. Capables know they are capable and klutzes know that they. are klutzes. But if you ask, everybody will claim to be capable. Both capables and klutzes have the option of taking a job in another industry where performance can be closely monitored. In the other industry where monitoring the performance of individual workers is easy, capable workers could earn $700 per week and klutzes could earn only $200 per week. a) In the industry where monitoring is difficult, suppose that a firm has the pessimistic belief that the only workers it can hire are klutzes. What is the highest wage that this firm would be willing to pay per week to hire a worker?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 3.3IP

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Solve the problem. 19) A company manufactures two ballpoint pens, silver and gold. The silver requires 3 min in a grinder and 4 min in a bonder. The gold requires 3 min in a grinder and 8 min in a bonder. The grinder can be run no more than 87 hours per week and the bonder no more than 51 hours per week. The company makes a $8 profit on each silver pen sold and $12 on each gold. How many of each type should be made each week to maximize profits? A) Silver pens: 0 Gold pens: 381 C) Silver pens: 1359 Gold pens: 381 B) Silver pens: 1 Gold pens: 382 D) Silver pens: 382 Gold pens: 1359
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Figure#5 Quantity of M&M's (0,10) 10 2. 41 Quantily o Skeles
Imagine you are the managing director of a full service restaurant. One day you receive a complaint letter from a guest reporting s/he was not satisfied with the follow up regarding their criticism of being overcharged in one of your restaurants. 1. Is there a training need? Discuss.
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Jeremy worked at a bank with a monthly salary of $1,500. He decided to quit his job and open a bookstore inhis neighborhood. He now pays $500 in rent, $80 in utilities and $120 in wages every month. He also paysthe publisher $5 per book sold. This month Jeremy sold 100 books at the price of $30 per book.a. What was the total revenue this month? Calculate this month’s explicit fixed cost, the variable costand the total cost.b. How much accounting profit did Jeremy make?c. How much economic profit did Jeremy make?d. If Jeremy had not quit his job at the bank, he could have been promoted and got a pay raise of 30percent. How would this affect his accounting profit and his economic profit?
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