Question 2. Consider a simple economy with two types of workers. There are capable workers (type...

60.1K

Verified Solution

Question

Advance Math

Question 2. Consider a simple economy with two types of workers.There are capable workers (type A), constituting 70% of thepopulation, with remaining workers (type B) being of averageability. There are two types of job opportunities as well, labeledGood and Bad. In a Bad job, either type of worker produces 20 unitsof output. In a Good job, Type A worker produces 80 units, and theType B worker produces 0. The economy is doing well so there isenough demand for workers. This means that for each type of jobcompanies must pay what they expect the employee to produce.Companies must hire each worker without observing his type and payhim before knowing his actual output. But Type A workers can signaltheir qualification by getting educated. For a Type A worker, thecost of getting educated to level n is 0.4n2, whereas for a Type Bworker, it is n2. These costs are measured in the same units asoutput, and n must be an integer.
(a) What is the minimum level of n that will achieveseparation?
(b) Now suppose the signal is made unavailable. Which kind ofjobs will be filled by which kinds of workers and at what wages?Who will gain and who will lose from this change?

Answer & Explanation Solved by verified expert

4.1 Ratings (748 Votes)

SOLUTION A Consider that total number of workers 100 Number of average workers 30 Number of capable workers 70 If we consider that thestandard mix of workers is hired by the company See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member