Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help guys I'm stuck >. < Consider a worker who has a 40-year work life (ages 26-65). During the first five years of his

Please help guys I'm stuck >.<

Consider a worker who has a 40-year work life (ages 26-65). During the first five years of his life he may acquire firm-specific skills which will increase his productivity only at the current firm during the next 35 years, or he may opt not to acquire any skills at all. Alternatively, he may acquire general skills, which will be useful to him at all firms.

If he acquires no skills, he produces shirts worth $100 per week for every week of his work life at this firm and at all other shirt factories. If he acquires firm-specific skills, he will produce shirts worth $(100)(A) for each week of his work life between the ages of 31 and 65 if he remains at the current firm, but only $(10)(A) of shirts each week during the first five years of his work life. If he acquires general skills, he produces $(12)(A) of shirts per week during the first five years and $(100)(1/2 + A/2) shirts for each week of his work life between ages 31 and 65. Assume that the interest rate is zero, and A > 1.

(a) What is the maximum amount that another firm will offer a 35-year-old worker who has invested in no skills up to that point?

(b) What is the maximum amount that another firm will offer a 35-year-old worker who has acquired general skills during ages 26 through 30?

(c) What is the maximum amount that another firm will offer a 35-year-old worker who has acquired firm-specific skills during ages 26 through 30?

(d) Consider a worker who has acquired firm-specific capital. What weekly wage is required between ages 31 and 65 to insure that the worker will never quit?

(e) What is the maximum weekly wage that the current firm can offer the worker between ages 31 and 65 if the worker acquired specific skills from ages 26 to 30 and the worker was paid $(10)(A) per week during those five years?

(f) What is the maximum amount of payment over the worker's entire work life between ages 26 and 65 that the firm can make without taking losses if the worker acquires general skills?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions