A risk-neutral manager is attempting to hire a worker. All workers in the market are of identical quality but differ with respect to the wage at which they are willing to work. Suppose half of the workers in the labor market are willing to work for a salary of $40,000 and half will accept a salary of $38,000. The manager spends three hours interviewing a given worker and values this time at $300. The first worker the manager interviews says he will work only if paid $40,000. Should the firm manager make him an offer or interview another worker?
Q: You are modeling a qualitative variable that takes on two classes (classes 1 and 2). In trying to…
A: The answer is given below
Q: An investor considers investing $17,000 in the stock market. He believes that the probability is…
A: Probability tells us the approximate chance of things taking place. It basically briefs us about the…
Q: True/False a. Consider a strategic game, in which player i has two actions, a and b. Let s−i be…
A: Since you have posted multiple questions, we will answer the first two questions for you. If you…
Q: A company has the option to procure a particular material from two sources: Source I assures that…
A: Given: Defectives in Source 1 = 2% Defective in source II =2.8% Total Material Supplied=1000 units.…
Q: Show that a decision maker who has a linear utilityfunction will rank two lotteries according to…
A: In decision theory, the expected value of an action is calculated by the probability of that outcome…
Q: Tom and Jerry are contestants on Jeopardy. Tom is leading with an accumulation of $12000, while…
A: Given information Tom Tom's initial wealth accumulation = $12,000 Tom's probability of winning = 55%…
Q: A risk averse individual will always choose the safe but less profitable activity instead of the…
A:
Q: In the mean-standard deviation graph, the line that connects the risk-free rate and the market…
A: I have solved the questions below using CAPM
Q: Multiple Choice Adverse selection describes a situation where an individual's demand for insurance…
A: In a market, there are various activities that results in market failure, such that externality,…
Q: Consider the game shown in Figure 3. Let A denote the probability that player 1 plays a, B the…
A: We are going to solve for Pure strategy Nash equilibrium and Mixed strategy nash equilibrium to…
Q: BestDeal.com and CrazySavings.com are two online retailers with free return policies. They sell the…
A: Equilibrium price is the point where both supply and demand curve intersect each other.
Q: Find the indicated probability for a binomial random variable X. Round your answer to three decimal…
A: Given: Probability of success (p)=07 Number of trials (n)=16 Consider X be the random variable that…
Q: Let U(x)= x^(beta/2) denote an agent's utility function, where Beta > 0 is a parameter that defines…
A: Utility function : U = x^(B/2) Gamble that pays: X = 10 with probability 0.2 X = 50 with…
Q: There are two types of used cars. Sellers know the quality of their cars, but buyers do not. Sellers…
A: seller willing to sell high-quality car = 2760 seller willing to sell low-quality car = 1560 the…
Q: Gary likes to gamble. Donna offers to bet him $31 on the outcome of a boat race. If Gary’s boat…
A: Not taking the gamble gives the $80 as an utility to gary.
Q: Indicate whether the statement is true or false, and justify your answer.Risk-averse individuals…
A: If the individual is a risk-averse, he has a concave value function for both prospective gain and…
Q: The application which provides a way of revising conditional probabilities by using available…
A: Probability is the concept that includes the reasoning of the success or failure of an event or a…
Q: Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for…
A: If the seller sells a bad quality car then the net gain is equal to the price received for bad…
Q: When a company hires a new employee, they must determine an appropriate wage based on the…
A: Scenario 1: An experience is a signal that indicates the individual is having an understanding of…
Q: A risk-averse individual is always willing to pay a positive amount of money to scape a mean-zero…
A: Risk-averse: - it is a strategy or the nature of the person of avoiding risk involved in capital…
Q: Recent news reports have found that, despite high vaccination rates, around 40% of new positive…
A: Probability: It refers to a situation under which it is stated that how much an outcome will occur.…
Q: Gary likes to gamble. Donna offers to bet him $54 on the outcome of a boat race. If Gary's boat…
A: The expected utility is determined by taking the weighted normal of all potential results in…
Q: Apple and Google are interested in hiring a new CEO. Both firms have the same set of final…
A: In game theory, a payout matrix is a table in which one player's strategies are written in rows, and…
Q: You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product…
A: Mr. A and Mr. B are the two firm that are competing against each other. Mr. B’s want is to maximize…
Q: Historical data indicates that only 35% of cable customers are willing to switch companies. If a…
A: A capable person able to switch i.e. P = 35% n = 12
Q: A biometric security device using fingerprints erroneously refuses to admit 2 in 1,000 authorized…
A: The probability that the person was really authorized can be calculated as follows:
Q: You need to hire some new employees to staff your startup venture. You know that potential employees…
A: When an employer does not know the full value an employee will add when they join, but the employee…
Q: Indicate whether the statement is true or false, and justify your answer.A typical value function is…
A: False, because a typical value function has both the concave and convex parts.
Q: John can cause an accident, which entails a monetary loss of $1000 to Jane. The likelihood of the…
A: The term payoff matrix is a table used in game theory that shows the strategies of both players. The…
Q: Suppose a group of people were tested for a disease and asked about their smoking status. Consider…
A: Given: Here, A = Person is smoker B = Tested Positive
Q: Consider a game where player 1 must choose T or M or B, player 2 must choose L or R, and their…
A: Let the randomized strategy for player 1 of choosing T be (p) , choosing M be (q) , choosing B will…
Q: Study: 30-Year Life Expectancy Gap in 2 Chicago Communities The life expectancy of people living in…
A: Economic growth and development somehow become the reason of improving the standard of living of…
Q: Suppose that an individual faces uncertainty regarding the return to a financial asset. The…
A: Asset Price = $1000 Return with probability (p) = 1.1 Asset return with probability (p) = 1000*1.1 =…
Q: Each of Player 1 and Player 2 chooses an integer from the set {1, 2, ..., K}. If they choose the…
A: Given information There are 2 players Player 1 and player 2 Both can choose set of integer…
Q: A biometric security device using fingerprints erroneously refuses to admit 3 in 1,500 authorized…
A:
Q: Suppose that there is asymmetric information in the market for used cars. Sellers know the quality…
A: Asymmetric information refers to the gap in the information available to the buyers and sellers in a…
Q: John wants to buy a used car. He knows that there are two types of car in the market, plums and…
A: A separating equilibrium is one where the outcomes are separated in accordance with the types of the…
Q: Derive the coefficients of absolute and relative risk aversion of the following functions, and point…
A: here we calculate the coefficients of absolute and relative risk aversion of the following functions…
Q: Apple and Google are interested in hiring a new CEO. Both firms have the same set of final…
A:
Q: Consider a coin toss experiment and the following assets. Asset A gives £200 if the first is heads,…
A: Let P be the probability of the event. Also, it is assumed that the tossed coin is unbiased in…
Q: You inherited your uncle's bakery in a rem family, but you prefer to keep your job and hired a local…
A: The principal-agent problem occurs mainly on account of contrary interests of different players in…
Q: Describe and use techniques that apply to decision making under uncertainty.
A: Methods of decision making under uncertainty: Maximin criterion: It is also known as a pessimistic…
Q: You are taking a multiple-choice test that awards you one point for a correct answer and penalizes…
A:
Q: Suppose that there is asymmetric information in the market for used cars. Sellers know the quality…
A: Asymmetric information refers to the situation when any of the trading partners has relatively more…
Q: Consider an expected utility maximizer whose utility function is U(w), where w denotes wealth,…
A: Utility for wealth, w= 0 U (w) = U(0) = 0 Utility for wealth, w= 100,000 U (w) = U(100,000) = 1 The…
Q: A drug company is considering investing $100 million today to bring a weight loss pill to the…
A: Investment made= $100 million Probability of selling pills at high price= 0.5 Profit made from pills…
Q: Qd1=8 Qd2=12 Y1=10,000 Y2=12,000
A: Elasticity of demand refers to the degree to which the quantity demanded of a good responds to…
Q: other best example of contingency planning about turnover of employees
A: An contingency planing is an arrangement formulated for a result other than in the typical…
Q: Show that an investor with a quadratic utility function ranks portfolios only on the basis of the…
A: Utility is a measure of relative satisfaction that an investor derives from totally different…
Q: Consider an individual who has a healthy state income of $10,000 and a sick state income of $2,000.…
A: People get health insurance in order to prevent themselves against the risk of getting sick by…
Q: Suppose that • The employee has an outside offer to work for $27 per hour, for 1500 hours per year…
A: Outside Offer $27/hour work for 1500 hours/year Current Work $20/hour work for 2000 hours/year…
Q: Peoples' behavior in behavioral economic games like the Dictator Game generally show that Many…
A: Dictator games are designed to assess how individuals respond to situations where self-interest and…
Q: In a mixed strategy equilibrium of the game below, what is the probability with which Player 2…
A: To find the PSNE, we will use the best response method to underline the maximum payoff to a player…
A risk-neutral manager is attempting to hire a worker. All workers in the market are of identical quality but differ with respect to the wage at which they are willing to work. Suppose half of the workers in the labor market are willing to work for a salary of $40,000 and half will accept a salary of $38,000. The manager spends three hours interviewing a given worker and values this time at $300. The first worker the manager interviews says he will work only if paid $40,000. Should the firm manager make him an offer or interview another worker?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- When a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Valerie places a value of $15,000 on the art piece and that she values this art piece more than any other collector. Suppose that if no one else shows up, Valerie simply bids $15,000/2=$7,500 and wins the piece of art. The expected price paid by Valerie, with no other bidders present, is $________.. Suppose the owner of the artwork manages to recruit another bidder, Antonio, to the auction. Antonio is known to value the art piece at $12,000. The expected price paid by Valerie, given the presence of the second bidder Antonio, is $_______. .Apple and Google are interested in hiring a new CEO. Both firms have the same set of final candidates for the CEO position: Indra, Cao, and Virginia. Both firms need to decide who to make a job offer to, and the hiring process is such that they each only make one job offer.If, say, Apple makes a job offer to Indra and Google makes a job offer to one of the other candidates, then Apple’s probability of success in hiring Indra is pIndra. The same is true for Google. If they both make a job offer to Indra, each has probability pIndra/2 of success. It has been estimated that pIndra = 20%, and pCao = pVirginia = 30% (Note that these probabilities need not add up to 100%).Suppose that both Apple and Google attach a valuation of 10 to successfully hiring Indra, and a valuation of 7 to successfully hiring each of the other candidates. A hiring attempt, if unsuccessful, has a valuation of zero. (a) Convert this story into a game by completing the following game table;GoogleIndra Cao…Apple and Google are interested in hiring a new CEO. Both firms have the same set of final candidates for the CEO position: Indra, Cao, and Virginia. Both firms need to decide who to make a job offer to, and the hiring process is such that they each only make one job offer. If, say, Apple makes a job offer to Indra and Google makes a job offer to one of the other candidates, then Apple’s probability of success in hiring Indra is pIndra. The same is true for Google. If they both make a job offer to Indra, each has probability pIndra/2 of success. It has been estimated that pIndra = 20%, and pCao = pVirginia = 30% (Note that these probabilities need not add up to 100%). Suppose that both Apple and Google attach a valuation of 10 to successfully hiring Indra, and a valuation of 7 to successfully hiring each of the other candidates. A hiring attempt, if unsuccessful, has a valuation of zero. Convert this story into a game by completing the following game table; Google…
- You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product into the market. Argyle’s only competitor is Baker Company, which is significantly smaller than Argyle. The management of Argyle has decided to pursue a short-term strategy of maximizing this quarter’s revenues, and you are in charge of formulating a strategy that will permit the firm to do so. After talking with an employee who was recently hired from the Baker Company, you are confident that (a) Baker is constrained to charge $10 or $20 for its product, (b) Baker’s goal is to maximize this quarter’s profits, and (c) Baker’s relevant unit costs are identical to yours. You have been authorized to price the product at two possible levels ($5 or $10) and know that your relevant costs are $2 per unit. The marketing department has provided the following information about the expected number of units sold (in millions) this quarter at various prices to help you formulate your decision: Argyle…You are a pricing manager at Argyle Inc.—a medium-sized firm that recently introduced a new product into the market. Argyle’s only competitor is Baker Company, which is significantly smaller than Argyle. The management of Argyle has decided to pursue a short-term strategy of maximizing this quarter’s revenues, and you are in charge of formulating a strategy that will permit the firm to do so. After talking with an employee who was recently hired from the Baker Company, you are confident that:(a) Baker is constrained to charge $10 or $20 for its product,(b) Baker’s goal is to maximize this quarter’s profits, and(c) Baker’s relevant unit costs are identical to yours.You have been authorized to price the product at two possible levels ($5 or $10) and know that your relevant costs are $2 per unit. The marketing department has provided the following information about the expected number of units sold (in millions) this quarter at various prices to help you formulate your decision:…Solve the following problem using an excel spreadsheet. A tobacco company isinterested in hiring a salesperson to promote smoking cigarettes in nightclubs. The position pays a flat salary of $50,000, regardless of sales levels. The firm has two applicants, Predictable Patty and Risky Ricky. Predictable Patty can produce with 100% certainty $100,000 a year in sales. Risky Ricky, on the other hand, can produce $300,000 with probability of 50%. But if he turns out to spend his time drinking and dancing in the nightclubs instead of making sales, he could actually cost the firm -$100,000 per year.a) During their first year on the job, what are the expected sales of Patty and Ricky? What are the firm’s expected profits on each worker?b) Now assume both workers are currently 25, and they will work until the retirement age of 65. The firm has the option to fire its new employee after one year based on sales, but can only hire one employee. Assume that it takes only one year to discover whether…
- Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for poor quality used cars is $10,000. Assume a potential used car buyer has imperfect information as to the condition of any given used car. Assume this potential buyer believes the probability a given used car is good quality is .60 and the probability a given used car is low quality is .40. Assume the seller has perfect information on all cars in inventory. If the seller sells the buyer a poor quality car, what is the net-benefit to the seller? a. A net gain of $6,000. b. A net loss of $20,000. c. A net loss of $6,000. d. A net gain of $10,000.Consider the following claim: “If a decision maker prefers one given lottery that yields $x with probability 1 over another given lottery whose expected return is $x, then we can fully characterize the agent's risk attitude. That is, this information comparing two given lotteries is enough to determine if the decision maker is risk averse, risk loving or risk neutral.” If this claim is TRUE, then provide a proof. If it is FALSE, then prove your argument by providing an explanation.You are modeling a qualitative variable that takes on two classes (classes 1 and 2). In trying to classify observation 11 (out of 20) you compute the conditional probability for class 1 as 0.51. How would you classify this observation?
- Two identically able agents are competing for a promotion. The promotion is awarded on the basis of output (whomever has the highest output, gets the promotion). Because there are only two workers competing for one prize, the losing prize=0 and the winning prize =P. The output for each agent is equal to his or her effort level times a productivity parameter (d). (i.e. Q2=dE1 , Q2=dE2). If the distribution of “relative luck” is uniform, the probability of winning the promotion for agent 1 will be a function of his effort (E1) and the effort level of Agent 2 (E2). The formula is given by...Prob(win)=0.5 + α(E1-E2), where α is a parameter that reflects uncertainty and errors in measurement. High measurement errors are associated with small values of α (think about this: if there are high measurement errors, then the level of an agent’s effort will have a smaller effect on his/her chances of winning). Using this information, please answer the following questions. Both workers have a…A risk averse individual will always choose the safe but less profitable activity instead of the riskier but more profitable activity. True or FalseWhen a company hires a new employee, they must determine an appropriate wage based on the productivity of that employee. If they pay the employee too little, then the employee will leave after a short time and the company will have to repeat the search, hiring, training, etc. If they pay the employee too much, they will have to terminate that employee to avoid financial losses to the company. Businesses look for credible signals such as education, training, and/or experience to indicate how productive an employee will be. What signals does experience communicate? Assume that you are considering hiring a new employee who has worked at an unrelated job for six years. When you call the previous employer all they will say is that the employee worked there for six years. Based on the confirmed experience, what do you know about the employee?