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Unformatted text preview: wk = w . Hadi Salehi Esfahani Solution to Quick Quiz 15: 1. If u = 0.05 and w = $50,000, what would be the wage rate at Kraft ? wk = $5000 + (1 u ) w = $5000 + (0.95)$50,000 = $52,500 2. If u = 0.10 and w = $50,000, what would be the wage rate at Kraft ? wk = $5000 + (1 u ) w = $5000 + (0.9)$50,000 = $50,000 Hadi Salehi Esfahani Solution to Quick Quiz 15: 3. What would be the wage rate that ensures just enough incentives for Krafts workers to put forth effort when u = 0.10? When u = 0.05? wk = $5000 + (1 u ) w = $5000 + 0.9 w wk = w = $5000/0.1 = $50,000 wk = $5000 + (1 u ) w = $5000 + 0.95 w wk = w = $5000/0.05 = $100,000...
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This note was uploaded on 01/27/2012 for the course ECON 509 taught by Professor Villamil during the Fall '08 term at University of Illinois, Urbana Champaign.
 Fall '08
 Villamil

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