There are two employers in Bucolic that hire people who do not have a high school degree: a grocery store and a hardware store. The grocery store pays $10 per hour and the hardware store pays $12 per hour. People who work at either store can work as many hours as they want at those wages. Assume that it takes two hours to interview for a job. Lee works at the grocery store, but would like to work at the hardware store. If Lee interviews at the hardware store, there is a 10 percent probability of being hired. Assume that Lee is risk-neutral. How many hours must Lee anticipate working at the hardware store to justify interviewing for the job?

Question

Quizplus · Accepted Answer

Given that the expected hourly benefit of interviewing at the hardware store is $0.20, Lee would have to work 100 hours at the hardware store to cover the $20 cost of interviewing there.

There Are Two Employers in Bucolic That Hire People Who