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Consider A Firm That Has Two Types Of Workers

Submitted by • October 22, 2018

Consider a firm that has two types of workers: “workaholics” and “hardworkers”. The production process is such that all employees have to work in teams of two people. A workaholic who works in a team with another workaholic produces $100 in output. If a workaholic is assigned to a team with a hard worker, their outputs are $90 and $80, respectively. In a team of two hard workers, each produces $50 in output. Currently 40% of the workforce are workaholics and the remaining 60% are hard workers.a. (10 points) How should the firm assign hard workers and workaholics to teams?b. (10 points) Suppose workaholics and hard workers can be easily distinguished and require different wages. At what wage ratio is the firm indifferent between hiring hard workers and workaholics?c. (5 points) How does your answer to part b above change if the ratio of hard workers and workaholics in the firm changes?

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