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 $5.00 per hour and the hardware store pays $6.00 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% 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

To justify the interview, Lee needs to make up for the $10 opportunity cost (2 hours at $5/hour) of interviewing. With a 10% chance of being hired at $6/hour, Lee needs to work 100 hours to earn an expected $10 more than at the grocery store.

There Are Two Employers in Bucolic That Hire People Who