A Firm Hires Two Kinds of Workers, Alphas and Betas

question 5

Multiple Choice

A firm hires two kinds of workers, alphas and betas.The population at large has equal number of alphas and betas.One can't tell a beta from an alpha by looking at her, but an alpha will produce $3,000 worth of output per month and a beta will produce $2,500 worth of output in a month.The firm decides to distinguish alphas from betas by having workers take an examination.A worker will be paid $3,000 if she gets at least 60 answers right and $2,500 otherwise.For each question that they get right on the exam, alphas have to spend 1/2 hour studying and betas have to spend 1 hour.For either type, an hour's studying is as bad as giving up $20 of income per month.This scheme leads to

• A)a separating equilibrium where alphas score 60 and betas score 0.
• B)a pooling equilibrium where alphas score 60 and betas score 0.
• C)a pooling equilibrium where everybody scores 60.
• D)a pooling equilibrium where everybody scores 0.
• E)a separating equilibrium where everybody scores 60.

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Definitions:

Concept Test

An evaluation process that involves presenting an idea for a product or service to a target audience to determine its feasibility and the potential interest of consumers.

Cross-functional New-product Development Team

A group comprising members from different departments working together to develop a new product.

New-product Idea

A concept for a product that has not yet been introduced to the market, potentially fulfilling a new consumer need or desire.

Customer Experience Management (CEM)

The process of managing the entire customer experience with the company.