An economy with competitive markets has 2 kinds of jobs, Routine & Skilled. There are 2 types of workers, Qualified & Unqualified. 60% of workers are Qualified while 40% are unqualified. In a Routine job, both types of workers produce 10 widgets. In a Skilled job, Qualified workers produce 100 widgets each, while Unqualified workers produce O. Labor markets are competitive, so each worker is paid their marginal product, i.e. how much they produce, in widgets. Everyone looks great in an interview, so companies must hire without knowing the worker's type and must pay the first period's wage without knowing their actual output. However, Qualified workers can signal their qualification by receiving an education. For a Qualified worker, the cost of getting educated to level n is 0.5n2. For an Unqualified worker, it is n². These costs are also measured in widgets. What is the maximum level of education that Qualified workers will obtain, in a separating equilibrium? 13.5 12 13 10
An economy with competitive markets has 2 kinds of jobs, Routine & Skilled. There are 2 types of workers, Qualified & Unqualified. 60% of workers are Qualified while 40% are unqualified. In a Routine job, both types of workers produce 10 widgets. In a Skilled job, Qualified workers produce 100 widgets each, while Unqualified workers produce O. Labor markets are competitive, so each worker is paid their marginal product, i.e. how much they produce, in widgets. Everyone looks great in an interview, so companies must hire without knowing the worker's type and must pay the first period's wage without knowing their actual output. However, Qualified workers can signal their qualification by receiving an education. For a Qualified worker, the cost of getting educated to level n is 0.5n2. For an Unqualified worker, it is n². These costs are also measured in widgets. What is the maximum level of education that Qualified workers will obtain, in a separating equilibrium? 13.5 12 13 10
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter14: Labor Markets And Income
Section: Chapter Questions
Problem 1SCQ: Table 14.10 shows levels of employment (Labor), the marginal product at each of those levels, and...
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