Reference no: EM132593094

Suppose that Apple is considering hiring a worker for two months and providing her with specific training in the first month. The worker's MRPL is $3,000 during the training period, but rises to $5,000 in the second month after training is complete. Apple faces an interest rate of 10%, and the cost of training the worker is $1000. If the worker does not go to work for Apple or quits after the first month, she can get a job at Microsoft with a monthly wage of $3,000.

(a) Write down the condition under which the firm will find it profit-maximizing to hire and train the worker (Hint: as in the problem set, use a ≥, not an = sign).

One issue we discussed in class is that workers may not be able to compare present and future revenues and costs in the same way that firms can. Suppose that the worker must pay off $3,100 worth of debt in the first month, regardless of whether she takes the job at Apple or Microsoft. In the second month, the worker has no specific budget requirement.

(b) Explain briefly (in words) the conditions under which the worker would be willing to work for Apple and receive training. (c) Determine the highest wage that the firm would be willing to pay the worker in the second month, such that the worker is still willing to accept the contract in the first month.

(d) Is it possible that the worker will go work for Apple and receive a wage of $3,100 in the first month, and then a wage of $3,500 in the second month? Briefly explain your answer.