(Adverse Selection) Mr. Vain stepped down as the CEO of PhotoSnap. The board of directors is responsible to hire a new CEO. There exist a number of possible successors. However, = 0.25 are un- skilled candidates and the board cannot distinguish unskilled from skilled ones. Only after hiring, the firm learns about the ma nager's skills. Skilled CEO candidates have a reservation wage of 25,000 and unskilled candidates have a reservation wage of 15,000. A skilled CEO adds value of 30,000 while an unskilled CEO only adds value of 16,000. PhotoSnap is risk neutral and the candidates do not change their skills. a) Which manager does PhotoSnap want to hire when she can observe the skill level? b) What does PhotoSnap pay on average for a new CEO? Is it sensible to offer the average reservation wage? What is the PV of the CEO in this case? c) What is the expected value that managers provide to the firm as a function of wage? d) What is the equilibrium wage the firm chooses to pay