7. Individual Problems 19-6 You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them: Employee Value Probability $60,000 0.1 $75,000 0.1 $90,000 0.1 $105,000 0.1 $120,000 0.1 $135,000 0.1 $150,000 0.1 $165,000 0.1 $180,000 0.1 $195,000 0.1 The expected value of hiring one employee is $ Suppose you set the salary of the position equal to the expected value of an employee. Assume that employees will not work for a salary below their employee value. The expected value of an employee who would apply for the position, at this salary, is $ Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is
7. Individual Problems 19-6 You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them: Employee Value Probability $60,000 0.1 $75,000 0.1 $90,000 0.1 $105,000 0.1 $120,000 0.1 $135,000 0.1 $150,000 0.1 $165,000 0.1 $180,000 0.1 $195,000 0.1 The expected value of hiring one employee is $ Suppose you set the salary of the position equal to the expected value of an employee. Assume that employees will not work for a salary below their employee value. The expected value of an employee who would apply for the position, at this salary, is $ Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:7. Individual Problems 19-6
You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as
follows, but you can't distinguish among them:
Employee Value
Probability
$60,000
0.1
$75,000
0.1
$90,000
0.1
$105,000
0.1
$120,000
0.1
$135,000
0.1
$150,000
0.1
$165,000
0.1
$180,000
0.1
$195,000
0.1
The expected value of hiring one employee is $
Suppose you set the salary of the position equal to the expected value of an employee. Assume that employees will not work for a salary below their
employee value.
The expected value of an employee who would apply for the position, at this salary, is $
Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is
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