Suppose You Are a Risk-Neutral Manager Attempting to Hire a New

question 38

Multiple Choice

Suppose you are a risk-neutral manager attempting to hire a new sales manager.All of the workers in the market have the same ability to manage and sell,but they differ with respect to the wage at which they are willing to work for your company.The market for sales managers is composed of three types of individuals: 85 percent are willing to work for $75,000 and 15 percent are willing to work for $85,000.The first interviewee is only willing to work for $85,000.If the human resource director spends five hours interviewing each candidate and the opportunity cost of this director's time is $500,then the director should:

• A) search again since the expected benefit of an additional search exceeds the cost.
• B) stop searching since the expected benefit of an additional search is less than the cost.
• C) search again since the expected benefit of an additional search is less than the cost.
• D) stop searching since the expected benefit of an additional search exceeds the cost.

---

Definitions:

Operating Results

The financial outcomes of a company's core business operations, often represented by its income or loss from operations before interest and taxes.

Financial Advantage

A benefit or edge a person or business has that allows for better financial performance or opportunities than competitors.

Fixed Manufacturing Overhead

Costs associated with the production that do not vary with the level of output, including salaries of managers and rent of the factory.

Unit Product Cost

A calculation of the expense required to manufacture one unit of a product, accounting for all production costs.