Question 3 A. Suppose that you are an employer and want to hire people for two...

Question 3

A. Suppose that you are an employer and want to hire people for two positions. These positions pay different amounts and require different levels of skill or dedication. If you know that taking rigorous classes in college is a measure of how skilled or dedicated one is how can you use this information to design a mechanism to get the “right” people to the “right” job?

B. Building off of A, suppose the cost of a hard class is 5,000 for the more skilled person and 8,000 for the less skilled person. Further, suppose the two salaries are 200,000 and 100,000. What are possible requirements to obtain the 200,000 dollar salary?

C. How might you apply this type of thinking to create optimal contracts for workers whose effort you can’t observe?

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Expert Solution

Rahul Sunny answered 1 year ago

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