Select the TWO equations that characterize the wages meant for a HIGHproductivity worker (GOOD type) in a potential separating equilibrium?Select 2 correct answer(s)3ws + WF= 576=√ws + √√wFws+wF = 288Ⓒ3ws + WF=ws+√√√wF= 32ws+wF = 5123√ws + √wF13√√ws + √√wF=24==64481024 Competing_risk neutral principals seek to attract workers. I he task the workerperforms when hired generates an output that is either worth €S or €F, with S largerthan F.The outcome is verifiable so that contracts take the form of wages (WS, WF),whereby Wg is paid when the output is worth €S and WF is paid otherwise.SThe workers are risk averse and they differ in their ability.A worker's ability can be high (GOOD type) or low (BAD type). The variable Ptdenotes the probability with which a worker with ability produces an output wortht€S. Therefore, a worker with ability t produces an output with an expected valueVt = (ptS+ (1 - pt)F). And the overall expected profits gathered bythe principal who hires this type areEnt = -Vt ptws (1 — pt)wF.Finally, a worker with ability t has an expected utility given byEUt = Pt√√ws + (1 − Pt) √/wFThe following table gives the values for Pt and Vt for each type.Value for VtGood typeBad typeValue for Pt3/41/2256144

Risk:Risk is taking a chance, when the amount gets invested then there is a risk factor which means…

Select the TWO equations that characterize the wages meant for a HIGH productivity worker (GOOD type) in a potential separating equilibrium? Select 2 correct answer(s) 3ws + WF = 576 √ws + √√wF ws+wF = 288 O√ws + √WF = 24 = = Ows+wF 03₁√ws + √√wF= 64 03√ws + √√wF 512 32 = 48 3ws+wF = 1024

Select the TWO equations that characterize the wages meant for a HIGH productivity worker (GOOD type) in a potential separating equilibrium? Select 2 correct answer(s) 3ws + WF = 576 √ws + √√wF ws+wF = 288 O√ws + √WF = 24 = = Ows+wF 03₁√ws + √√wF= 64 03√ws + √√wF 512 32 = 48 3ws+wF = 1024

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 18.1IP

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1. Consider the figure below, which depicts the matching of jobs and workers. There are two jobs at firms X and Y and two workers A and B. Wage Rate Way WAX RAX R Ryy Risk of Injury a. Which worker is more risk averse? A or B? Which job does he take? How much does he carn? What is the highest utility he can achieve given the job opportunities? b. Which firm has the higher cost of reducing risk? Whom will it employ? How much will it pay? What is the highest level of profits it can achieve given the labor force? c. Draw the hedonic wage function on the graph and explain what kind of information it contains. d. What are the two main behavioral insights of the hedonic wage theory?
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