Consider an investment bank who looks to fulfilling a high-level vacancy. The salary for this
position is $200K. The applicant pool consists of two types of candidates, a qualified type that brings in
$400K in output and an unqualified type that brings in $150K in output. 6 in 10 candidates are qualified
but the bank cannot distinguish which is which. It can screen the applicants but this will cost $3000 per
applicant and has only 70% accuracy.
(i) Should the firm screen its applicants? Show work.
(ii) What is the minimum level of accuracy beyond which the bank chooses screening?
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