How high must be the new salary for the person to switch the job.

Question

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Answer 1

Question

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

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Students have asked these similar questions

Janie works for an accounting firm. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Before her raise, if Janie decreases her hours of work from 30 to 20 hours per week, the marginal utility gain from having more leisure is: Hours of Leisure Total Utility from Leisure Income Total Utility from Income 0 0 0 0 10 29 300 40 20 54 400 72 30 75 600 96 40 86 800 108 50 92 900 116 1200 120 1500 122 1600 124 2000 125 Question 4 options: 29 21 13 7

Clarice has a utility function: U(Y) = 1000 - (100/Y), where Y is her income. clarice has just graduated from college and has a career choice for her first job of either working as a teacher and earning $40,000 or trying to become a theatre lighting director and earning $70,000 (if there is growth in the demand for theatre) or $20,000 (if there isn't growth in the demand for theatre). there is a 50% probability of growth. a consulting firm guarantees Clarice that it already knows whether there will be growth in the demand for theatre next year. what is the maximum amount Clarice should be willing to pay for this information?

An individual’s utility function is given by where is the amount of leisure measured in hours per week and is income earned measured in cedis per week. Determine the value of the marginal utilities, when = 138 and = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?

Answer 2

Question

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

Answer 6

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

Answer 7

Chapter 17, Problem 1.2P

To determine

How high must be the new salary for the person to switch the job.

Answer 8

Expert Solution & Answer

Explanation of Solution

The current salary of the individual is $115,600 per year, which gives a utility of 340. Since the main concerns of the individual is the utility from the income, the individual must be offered an income that provides a utility of over 340 utils. The probability of the company's success can be calculated by setting the probability equal to 'p' as follows:

Let the probability of success be 'p'. Then the salary from the new job would be equal to the fixed salary and the probable profit that the individual can make. This can be calculated as follows:

Salary from new job=(1−p)(75,000)+p(350,000)Setting this equal to 340 we get,340=(1−p)(273.86)+p(591.61)317.75p=340−273.86p=66.14317.75=0.21

Thus, P must be equal to 0.21. Thus, substituting the value in the equation gives the expected value of the salary that the individual must receive in order to switch the job. This can be calculated as follows:

New salary=(1−0.21)(75,000)+0.21(350,000)=0.79(75,000)+0.21(350,000)=59,250+73,500=132,750

Thus, the new salary must be equal to $132,750 per year, which means that the new salary must be higher than the existing salary by $17,150 in order to to switch the job.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Opportunity cost: The opportunity cost is the next best alternative that one forgoes while making the decisions from the range of choices provided.

Answer 12

Ch. 17 - Prob. 1.2P Ch. 17 - Prob. 1.3P Ch. 17 - Prob. 1.4P Ch. 17 - Prob. 2.1P Ch. 17 - Prob. 2.2P Ch. 17 - Prob. 2.3P Ch. 17 - Prob. 2.5P Ch. 17 - Prob. 2.6P Ch. 17 - Prob. 2.7P Ch. 17 - Prob. 3.1P

How high must be the new salary for the person to switch the job.

How high must be the new salary for the person to switch the job.

Explanation of Solution

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Chapter 17 Solutions