wolfman62 wolfman62

27-10-2022
Business

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3) Suppose a labor market is composed of studs and duds. Studs are worth $50K and duds are
worth $25K. Employees know their worth, but employers do not. Employers are willing to pay a
$5K premium for both types of employees. What is the maximum proportion of duds the market
can sustain to avoid adverse selection?

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