There are two types of workers in financial industry: A (able) type and C (challenged) type. Potential employers in finance will pay $160,000 a year to a type A and $60,000 to a type C. Unfortunately, employers cannot observe the worker's type while each worker knows his or her own type. However, a market research informs all employers and workers that 60% of the population is type A and 40% is type C. a) Assume that employers in finance treat every applicant as a random draw from the population and pay all the same salary. Then, the pooling salary is $ thousands separator). (Hint: omit the b) Alternative employment opportunities outside of the financial industry yield the A types a salary of $125,000 and the C types a salary of $30,000. If the pooling salary in a) is offered to any applicant in finance, type workers will leave the financial industry and only type workers will stay in the industry. When this continues, the salary in finance will eventually reduce to $ (Hint: omit the thousands separator).
There are two types of workers in financial industry: A (able) type and C (challenged) type. Potential employers in finance will pay $160,000 a year to a type A and $60,000 to a type C. Unfortunately, employers cannot observe the worker's type while each worker knows his or her own type. However, a market research informs all employers and workers that 60% of the population is type A and 40% is type C. a) Assume that employers in finance treat every applicant as a random draw from the population and pay all the same salary. Then, the pooling salary is $ thousands separator). (Hint: omit the b) Alternative employment opportunities outside of the financial industry yield the A types a salary of $125,000 and the C types a salary of $30,000. If the pooling salary in a) is offered to any applicant in finance, type workers will leave the financial industry and only type workers will stay in the industry. When this continues, the salary in finance will eventually reduce to $ (Hint: omit the thousands separator).
Chapter7: Uncertainty
Section: Chapter Questions
Problem 7.15P
Related questions
Question
Transcribed Image Text:There are two types of workers in financial industry: A (able) type and C (challenged) type. Potential
employers in finance will pay $160,000 a year to a type A and $60,000 to a type C. Unfortunately,
employers cannot observe the worker's type while each worker knows his or her own type.
However, a market research informs all employers and workers that 60% of the population is type
A and 40% is type C.
a) Assume that employers in finance treat every applicant as a random draw from the population
and pay all the same salary. Then, the pooling salary is $
thousands separator).
(Hint: omit the
b) Alternative employment opportunities outside of the financial industry yield the A types a salary
of $125,000 and the C types a salary of $30,000. If the pooling salary in a) is offered to any
applicant in finance, type
workers will leave the financial industry and only
type
workers will stay in the industry. When this continues, the salary in
finance will eventually reduce to $
(Hint: omit the thousands separator).
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you