1. Happy Homebuyers Realty Services (HHRS) is a fictional Halifax based real estate agency.HHRS hires real estate agents who assist homebuyers with finding their new homes. For simplicity, assume that HHRS is paid $10,000 for each home that is purchased by a buyer. Assume at first that this $10,000 goes to the firm, and not to an individual agent. Also assume that real estate agents only work at HHRS for a maximum of 1 year. This last assumption simplifies some of the calculations.

a--HHRS pays each agent $100,000 per year regardless of how many homes that are purchased. Good real estate agents will generate 20 home purchases in a year. Bad real estate agents will only generate 5 home purchases in a year. 50% of job applicants to HHRS would make good agents, the remaining 50% would make bad agents. If HHRS is unable to distinguish between these two types of individuals, would HHRS be profitable if they hired agents at random from the pool of job applicants? (2 points)

b--Imagine that HHRS could pay a mystery home buyer $20,000 to take each job applicant through a "test buy". After an applicant has gone through the test buy, the mystery home buyer will inform HHRS whether a given applicant is a good real estate or a bad real estate agent. Assume that the mystery home buyer is 100% accurate in this regard. Would HHRS be willing to hire this mystery home buyer? (3 points)

c--Imagine that another local realty firm, Buy Your Own Bungalow (BYOB) observes which agents work for HHRS. Assume that they also know HHRS's hiring strategy. That is, they know whether HHRS hires a mystery home buyer. Would BYOB be able to profit off of poaching an agent from HHRS by offering such an agent a salary of $125,000. Why or why not? Would a real estate agent who works for HHRS accept this offer? Why or why not? (2 points)

d--Assume that real estate agents are able to generate as many home purchases while working for BYOB as they are for HHRS. Also assume that BYOB also receives $10,000 per home that is purchased.

f--If an HHRS agent receives a $125,000 salary offer from BYOB, they may choose to take this offer to their manager at HHRS. If HHRS is forced to match this offer for every agent that they hire, what would be their profit per job applicant? (2 points)

g--If you found in part b) that HHRS hires the mystery home buyer, continue to assume so for this question. If you found that they do not hire the mystery home buyer, continue to assume so for this question.

h--Given your answer in d), does it make sense for HHRS to hire a mystery home buyer when BYOB is ready to offer agents a $125,000 salary? Why or why not. (4 points)