Adverse Selection: Suppose you are a hiring manager for a large firm. You have two almost identical resumes for a position. The going rate (salary) for the position is $45,000. The job candidates are both graduates from a state university, same major, about the same age, and same gender (race unknown). The academic background is roughly the same. But, one is a good candidate (personality, easy going, a go-getter, worth $50,000) but the other is the opposite (worth $40,000). The issue is that you cant tell them apart from the submitted application dossier documents.

Question: describe how asymmetric information would cause you to offer a salary of $50,000 instead of the going rate. Who do you end up hiring? What are the chances of getting the good candidate if you offer $40,000? Explain your reasoning using the economic concepts such as adverse selection and information asymmetry.