Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 19, Problem 2MC
To determine
Insurance premium price.
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An employer faces two types of employees. Regular workers at 90% of the population and generate $75,000 in productivity. Exceptional workers are 10% of the population and generate $100,000 in productivity. Employees know their types and reject salaries below their productivity. If employer offers a salary equal to the average productivity in the population, what will be the employer’s per-employee profit? How can this be fixed?
An employer faces two types of employees. Regular workers at 90% of the population and generate $75,000 in productivity. Exceptional workers are 10% of the population and generate $100,000 in productivity. Employers know their types and rejects salaries below their productivity. If employer offers a salary equal to the average productivity in the population, what will be the employer’s per employee profit? How can this be fixed?
Jobs where the product or service is "non-essential" yet is in high demand with a limited pool of exceptionally talented workers are likely to have higher wages than jobs where the product or service is "essential."
True
False
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Managerial Economics: A Problem Solving Approach
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- Fred wants to hire Barney to manage his retail store. Barney can apply a high level of effort (at a cost to him of $30), a medium level of effort (at a cost to him of $10), or a low level of effort (at a cost to him of $0). Fred's profits depend not only of the level of Barney's effort but also on the state of consumer demand. Fred believes that demand will be high with probability 50 percent (and therefore demand will be low with probability 50 percent). Fred has determined the following possible profit levels (before paying Barney) will occur depending on Barney's effort and the state of consumer demand: Demand low high effort low 20 40 medium 40 80 high 80 100 Of the choices below, what is the largest percentage range of profit provided to Barney that would ensure Barney would supply high effort? a. any percent greater than 75.00 percent (3/4). b. any percent greater than 66.66 percent (2/3). c. any percent greater than 50.00 percent (1/2).d. any…arrow_forwardUsing the threat of dismissal can Multiple Choice lower worker productivity. be effective only if there is also a performance bonus. have no effect on worker productivity. raise worker productivity.arrow_forwardA real estate firm faces two kinds of employees, those able to sell 10 houses/year, and those able to sell 5 units/year. High-productivity employees are willing to work for $100K/year while low-productivity employees are willing to work for only $50K/year. Which compensation scheme would be able weed out low productivity workers the best? Group of answer choices Offer a salary of $100K. Offer a salary of $75K plus $5K/unit commission. Offer a sales commission of $10K/unit. Offer a sales commission of $20K a unit starting with 6th unit. Offer a salary of $50K plus a sales comission of $10K per unit.arrow_forward
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