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A firm is considering adopting a plan in which it would pay employees less than their MRPL early in their careers and more than their
- A firm is considering adopting a plan in which it would pay employees less than their MRPL early in their careers and more than their MRPL late in their careers. For a typical worker at the firm MRPL = 10 + 0.1T, where T = the number of years which the worker has been employed at the firm and MRPL is measured in dollars per hour. The worker's wage per hour is W = 8 + 0.2T. Assume that this wage is high enough to attract workers from alternative jobs, that the discount rate for the firm is zero, and that the expected tenure of a typical worker is 35 years. If workers retire at the end of 35 years, will this plan be profitable for the firm? Explain. For how many years will the firm "underpay" its workers?
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