Question
The elements used in this question are defined as below: w(t) = wage rate in period t (t = 0, 1, ..., T) VMP(t) =
The elements used in this question are defined as below:
w(t) = wage rate in period t (t = 0, 1, ..., T) VMP(t) = value of marginal product in period t (t = 0, 1, ...)
C(t) = cost of training in period t (t = 0).
a. Assume the w(t), VMP(t), and C(t) occur at the beginning of a period. In the Robberbarron Corporation (RC), a profit-maximizing organization, the VMP of an untrained worker is a constant $400 per period and C(O) is equal to $260. After training, VMP rises to a constant $800 per period. Ms. X walks into the personnel office and makes Robberbarron the following offer: She will work for $400 during her first period of employment (period 0), RC will pay for her specific training and after completing training she will work for only one period (period 1) for a wage of $400. What is the present value of the specific training of Ms. X if the cost of capital is 9 percent? b. If the Robberbarron Corp. is required to pay Ms. X a wage of $650 each period due to an equal pay by gender law will she be hired? c. Show your answer mathematically and explain. Also, explain how your answer might change in either scenario, if the training provided by the firm was general human capital training rather than specific training
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