Improving a Predictive Employment Model
A consulting firm builds a simple economic model to help a client predict its future labor costs. A key feature of the model is the assumption that the client's hiring process is flawless, meaning every new employee hired is guaranteed to be diligent and productive. When the model is tested against the client's historical data, it consistently underestimates the actual labor costs. Based on the model's simplifying assumption, explain the most likely reason for this consistent error.
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Science
Economy
CORE Econ
Social Science
Empirical Science
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
Application in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Property Rights and Noise Pollution
An economic model of the employer-employee relationship is based on the simplifying premise that a company can flawlessly distinguish between job applicants who will be diligent and those who will not, and consequently only hires the diligent ones. Which of the following real-world business challenges is this model explicitly designed to ignore?
Evaluating a Simplified Economic Model
An economic model that assumes firms can perfectly identify and hire only diligent workers is useless for understanding real-world employment because this assumption is unrealistic.
Improving a Predictive Employment Model
Misinterpreting an Economic Model
Evaluating Simplifying Assumptions in Economic Models
In an economic model of the employer-employee relationship, it is assumed that firms can perfectly screen applicants and hire only those who will be diligent. What is the primary analytical purpose of making such an unrealistic assumption?
Economic models often use simplifying assumptions to focus on specific relationships. Match each assumption about a firm's hiring process with the real-world complexity it is designed to set aside for the purpose of the model.
An economic model of employment assumes that a firm can perfectly screen job applicants, meaning it can identify with complete accuracy which candidates will be diligent workers. Within the logical framework of this specific model, what is the most direct consequence of this assumption?
An economic model that assumes firms can perfectly identify and hire only diligent workers is useless for understanding real-world employment because this assumption is unrealistic.