
How high must be the new salary for the person to switch the job.

Explanation of Solution
The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:
Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:
Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:
Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.
Want to see more full solutions like this?
Chapter 17 Solutions
Principles Of Microeconomics
- The problem statement never defines whether the loan had compound or simple interest. The readings indicate that the diference in those will be learned later, and the formula used fro this answer was not in the chapter. Should it be assumbed that a simple interest caluclaton should be used?arrow_forwardNot use ai pleasearrow_forwardNot use ai pleasearrow_forward
- Not use ai pleasearrow_forwardSuppose there is a new preventative treatment for a common disease. If you take the preventative treatment, it reduces the average amount of time you spend sick by 10%. The optimal combination of Z (home goods) and H (health goods). both may increase both may increase or one may stay the same while the other increases. both may decrease H may increase; Z may not change Z may increase; H may decreasearrow_forwardIn the Bismarck system,. may arise. neither selection both adverse and risk selection ☑ adverse selection risk selectionarrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





