A High Wage Offer Attracting Unmotivated Workers

A Firm's Option to Offer a Wage Higher Than the No-Shirking Minimum

A company employs 40 workers and pays a uniform wage of €710. This specific wage is the minimum amount required to ensure that none of the 40 workers shirk their responsibilities, as it just meets the no-shirking condition for the worker with the highest reservation wage in the group. If the company decides to lower the wage for all employees to €690, what is the most likely outcome?

Optimal Wage Setting for a Startup

Wage Setting and Worker Characteristics

A language school wants to employ 40 tutors and prevent shirking. It sets a uniform wage for all 40 tutors. This wage is determined by calculating the average of the individual no-shirking wages required for each of the 40 tutors.

A consulting firm needs to hire 60 analysts and wants to set a uniform wage that prevents any of them from shirking (not working diligently). The firm determines that the minimum wage required to prevent shirking is different for each potential hire, based on their individual circumstances. For the 30th analyst hired, this minimum wage is $72,000. For the 60th analyst hired (the one with the highest reservation wage in the group), the minimum wage to prevent shirking is $80,000. Match each potential uniform wage the firm could offer to its most likely outcome.

Evaluating a Differentiated Wage Policy

A company wants to hire a group of 50 employees and set a single, uniform wage that is just high enough to prevent any of them from shirking. The company knows that each potential employee has a different reservation wage. To set this single wage correctly, the company must base it on the no-shirking wage calculated for the individual employee who has the highest ________.

A firm wants to hire a specific number of employees and set a single, uniform wage that is just high enough to prevent any of them from shirking. Arrange the steps below in the correct logical order that the firm should follow to determine this wage.

Adjusting the No-Shirking Wage for a Smaller Workforce

A language school employs 40 tutors at a uniform wage of €710. This wage is the minimum amount necessary to ensure the 40th tutor hired, who requires the highest wage to be diligent, does not shirk. For the very first tutor hired, the minimum wage required to prevent them from shirking is only €660. Which statement best analyzes the economic situation for this first tutor?