Suppose that a firm finds that its low-productivity workers have a marginal revenue product of $21,000...

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Economics

Suppose that a firm finds that its low-productivity workers havea marginal revenue product of $21,000 per year and that itshigh-productivity workers have a marginal revenue prod- uct of$35,000 per year. The cost of receiving a yearâ€™s worth of highereducation is $4,000 for a low-productivity worker and $3,200 for ahigh-productivity worker. (This cost can be thought of as repaymenton loans that have been incurred in the process of obtaining theeducation.) The firm plans to offer a wage of $21,000 to workerswithout higher education and $35,000 to workers who attain aâ€œcertainâ€ level of higher education.
If this firm uses this pair of wage offers and wishes to createa separating equilibrium using education as a separating device,how many years of education should be re- quired to receive thehigher wage?
Why does education work as a signal in this instance?
Does education increase the marginal productivity of workers inthis instance?

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Solution The hilter kilter data emerges due to absence of data At that point if any gadget can transfer the data about the nature of the item it can assist with forestalling deviated data Signal is such a gadget which transfers some data See Answer

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