Suppose you are a risk-neutral manager attempting to hire a new sales manager.All of the workers in the market have the same ability to manage and sell, but differ with respect to the wage at which they are willing to work for your company.The market for sales managers is composed of three types of individuals: 85 percent are willing to work for $75,000 and 15 percent are willing to work for $85,000.If the first interviewee is only willing to work for $85,000.If the human resource director spends five hours interviewing each candidate and the opportunity cost of this director's time is $500, then the director should

Question

Quizplus · Accepted Answer

Since the market for sales managers consists of three types of individuals, 85% of workers are willing to work for $75,000 and 15% are willing to work for $85,000. If the first interviewee is willing to work for $85,000, it is highly unlikely that the subsequent search would yield a more qualified sales manager who would be willing to work for $75,000. The expected benefit of an additional search is therefore less than the cost, so the director should stop searching. Therefore, the correct answer is D.

Suppose You Are a Risk-Neutral Manager Attempting to Hire a New