1. afirm’s workforce is on average 20 years away from retiring. The firm’s workers Supposecould find similar work in other companies earning $40,000 per year. Also,suppose that workers who shirk their work have a .30 chance of being dismissed.
a. Forsimplicity, assume that workers could find a job in an alternative company withno search costs. What would the firm have to pay to impose shirking costs of$60,000 on the average worker during his (her) work life expectancy? Show yourwork.
b. Findthree salary-probability of dismissal combinations that would yield shirkingcosts of $60,000 for the average worker over his (her) work life expectancy.
2. Supposea firm is considering installing cameras and using spy software on thecomputers at the office to monitor its workers in addition to hiring additionalsupervisors. The firm estimates that increasing the probability of catchingworkers who shirk by .01 costs the company $10,000 per year. For example, inthe problem above when going from 0.30 to 0.31, it would cost the firm $10,000per year. How much would the firm have to spend in order to impose shirkingcosts of $75,000 on its average worker? Show your work. Assume that
· the firm’s work force is on average 20years away from retiring
· that the firm’s workers could find similarwork in other companies earning $40,000
· that the company currently pays itsworkers $42,000
· and that the current probability ofcatching workers who shirk is 0.30,