A firm signs a 52-week long contract with a worker

A firm signs a 52-week long contract with a worker where the firm promises to provide 1-week paid training at some point during his employment. The worker can quit anytime and find another job at his market wage, and the training costs 500 dollars to the firm. While the daily productivity of the worker is given by 40 dollars before the training (due to his general skills), it increases to 65 dollars after the training for the firm.

If the training is firm-specific and the worker is paid weekly, what is the weekly wage of the worker? In which week the firm will provide the training? What will be the profit of the firm?


If the training is general and worker is paid weekly, what is the weekly wage of the worker? In which week the firm will provide the training? What will be the profit of the firm? [Hint: The firm might choose to pay different wage amounts before and after the training]


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