an employer faces two types of employees regular workers 70%of the population an

Question

an employer faces two types of employees regular workers 70%of the population and generate $100,000 in productivity. Exceptional workers aor 30% of the population, and generate $120,000 in productivity. Employees know their types, and reject salaries below their productivity. If the employer offers a salary equal to the averate productivity in the population, what will be the employer's per employee profit?

a) -$10,000

b) - $6000

c) $0

d) $4000

(please show the work and explain the answer, thank you)

Explanation / Answer

The average productivity of the population is found by .3 x 120,000 + .7 x 100,000 which equals 106,000

Now, if the employer pas every employee $106,000, I'm going to assume that he has 100 employees.

70 of those employees make a total of 7,000,000, while 30 of them will make 3,600,000, making the employers total revenue 10,600,000.

The employer will spend `10,600,000 dollars on his employees salaries (106,000 x 100), thus making his total profit per employee $0 (10,600,000-10,600,000 = 0)

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