Suppose workers from group A have an average productivity of $15 per hour and that employers have a productivity test that is 100% accurate 1/3 of the time, but has no value 2/3 of the time. What is the best estimate of the VMP of a worker from group A with a test score of $21 per hour?
A)$13
B)$18
C)$17
D)$21

Question

Quizplus · Accepted Answer

Since the productivity test has no value 2/3 of the time, we should assume that the worker's productivity is equal to their average productivity of $15 per hour. Therefore, the VMP of a worker from group A with a test score of $21 per hour is likely to be between $15 and $21. 
If the test is accurate 1/3 of the time, this means that the test provides useful information 1/3 of the time, and in these cases, we can assume that the worker's productivity is close to the test score of $21 per hour. Therefore, we can estimate the VMP to be closer to $21 than $15, but not exactly $21. 
Based on this reasoning, the best estimate of the VMP would be slightly higher than the average productivity of $15 per hour but not equal to the test score of $21. So, the best choice is C) $17.

Suppose Workers from Group a Have an Average Productivity of $15