Q) Suppose that utility for a worker is u(w)=w^.5. If the wage (w) offered is $64, there is a 50% chance of being fired, and switching costs are $28. What is the expected utility for the worker? Explain it early
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Q: Q) Suppose that utility for a worker is u(w)=w^.5. If the wage (w) offered is $64, there is a 50%…
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Q) Suppose that utility for a worker is u(w)=w^.5. If the wage (w) offered is $64, there is a 50% chance of being fired, and switching costs are $28. What is the expected utility for the worker?
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- Q) Suppose that utility for a worker is u(w)=w^.5. If the wage (w) offered is $64, there is a 50% chance of being fired, and switching costs are $28. What is the expected utility for the worker? Solve it early I upvote.As an employer, suppose you find it costly to monitor employee effort 100 percent of the time. What compensation options, in terms of the basis of pay, are available to ensure that you get appropriate levels of employee effort? What factors would you consider in choosing among these options?A company decides whether and how to induce a manager to put in high effort to increase the changes that the project succeeds. Unfortunately, the manager's effort is unobservable. the value of a successful project is $2 million; the probability of success given high effort is 0.4; the probability of success given low effort is 0.2 The manager's utility is the square root of compensation (measured in millions of dollars) and his disutility from exerting high effort is 0.1. The reservation wage of the manager is $160000. To induce HIGH effort, the company should pay the manager $______ in case of a successful project and $______ in case of an unsuccessful project.
- The dollar amount that a manager would be just willing to trade for the opportunity to engage in a risky decision is known as , Multiple Choice marginal utility of profit. the certainty equivalent. expected utility of profit. opportunity cost.a. On a graph with the probability of injury on the x-axis and the wage level on the y-axis plot two indifference curves, labeled UA and UB, so that the person associated with UA is less willing to take on risk relative to the person associated with UB. Explain what it is about the indifference curves that reveals person A is less willing to take on risk relative to person B. b. Consider a third person who doesn’t care about the risk associated with the job. That is, he doesn’t seek to limit risk or to expose himself to risk. On a new graph, draw several of this person’s indifference curves. Include an arrow on the graph showing which direction is associated with higher levels of utility. c. Consider a wage-risk equilibrium that is characterized by an upward-sloping hedonic wage function. Now suppose there is a government campaign that successfully alters people’s perception of risk. In particular, each worker adjusts her preferences so that she now needs to be more highly compensated…In a bad economy, a CEO has a 10% chance of meeting earnings estimates at regular effort, and a 15% chance at extraordinary effort. Extraordinary effort costs the CEO $10,000. How large a bonus should the CEO be paid for meeting estimates to encourage extraordinary effort? $10,000 $100,000 $200,000 $250,000 $1,000,000
- Suppose a company is hiring graduates from Harvard and Yale and they want to hire people with very high predicted productivity. All they use to predict productivity is where they went to school and their GPA. There is no difference in average true ability between students at Harvard and Yale. However, while Yale GPAs are excellent predictors of performance at this company, Harvard GPAs are not. The company hires very few graduates and the cutoff for expected productivity is well above average. What will be true about the GPA cutoffs for the two schools? A. The cutoff for Harvard will be higher.B. The cutoff for Yale will be higher.C. The cutoffs will be the same.D. There is not enough information to answer this question.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?Derive the utility function of a worker who is aiming to maximize his utility in the market for risky jobs. Explain and illustrate graphically how this worker will be making his choice among different alternatives of risk/wage combinations.
- Define intrinsic rewards. A. payment made to retired workers from an investment fund B. wages earned for working more than the normal allotted time in a workday C. reasons for a person to do something that are not based on wage or salary D. salaries earned by employees for being especially great at their jThe more risk-averse the worker, a. the shallower the wage-risk indifference curves when risk is graphed on the x-axis. b. the more productive they are relative to risk-loving workers. c. the more willing they are to work in riskier environments for a relatively low small in the wage. d. the greater the wage decrease the worker would be willing to accept in exchange for a safer work environment. e. the less willing they are to work in risky environments regardless of the wage3. A firm that is located in country H, where price levels are p = (1,1), needs to send one of its two employees to its branch in country F. However, in country F price levels are p′ ≫ p, so the firm will have to pay additional salary to ensure that its employee is equally well-off in country F as she was in country H. Suppose the utility functions of the two employees are u1(x1, x2) = x1 + x2 and u2(x1, x2) = min {x1, x2}. The two employees are otherwise identical, including current salary. If the firm wants to minimize the additional salary it needs to pay, which employee should it send? Explain.