Finds that only incompetent applicants respond

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Reference no: EM131071063

Suppose all firms in an industry have "competent" managers and earn zero economic profit. The manager of one of the firms suddenly leaves and the firm finds that only incompetent applicants respond when the position is advertised at the original salary of $50,000/yr (which is the going rate for competent managers in this industry).Under an incompetent manager paid this salary, the firm will experience an economic loss of $20,000/yr. At what salary would it make sense for this firm to hire an incompetent manager?

Reference no: EM131071063

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