7 . Individual Problems 19-6

You need to hire some new employees to staff your startup venture. You know that potential employees are distributed throughout the population as follows, but you can't distinguish among them:

Employee Value	Probability
$50,000	0.1
$57,000	0.1
$64,000	0.1
$71,000	0.1
$78,000	0.1
$85,000	0.1
$92,000	0.1
$99,000	0.1
$106,000	0.1
$113,000	0.1

The expected value of hiring one employee is $. ?

Suppose you set the salary of the position equal to the expected value of an employee. Assume that employees will not work for a salary below their employee value.

The expected value of an employee who would apply for the position, at this salary, is $ ?

Given this adverse selection, your most reasonable salary offer (that ensures you do not lose money) is $ ?