What is the equilibrium of this scheme

Reference no: EM131204343

A firm hires two kinds of workers, 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 making them pass an examination. For each question that they get right on the exam, alphas have to spend half an hour studying and betas have to spend one hour. A worker will be paid $3,000 if she gets at least 40 answers right and $2,500 otherwise. For either type, an hour of studying is as bad as giving up $20 income. What is the equilibrium of this scheme?

Reference no: EM131204343

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