4. Consider the following problem discussed in class:• workers with productivity 0 E {1, 2} with respective probabilities p and 1 – p,• education choice e e {0, 1}• costs for the two types are c(1) = and c(2) = ?,• market pays expected wages.Let s denote the equilibrium probability with which type 0 will choose e = 1.(a) Construct an equilibrium with s† = s = 0.(b) Under what conditions does the above equilibrium fail the CKIC?

(a) Equilibrium with s₁ = s₂ = 0: In this scenario, neither type of worker chooses education (e =…

4. Consider the following problem discussed in class: • workers with productivity 0 € {1,2} with respective probabilities p and 1 P, education choice e = {0, 1} • costs for the two types are c(1) = and c(2) = ¾¼, • market pays expected wages. Let s denote the equilibrium probability with which type will choose e = 1. (a) Construct an equilibrium with st = s₂ = 0. (b) Under what conditions does the above equilibrium fail the CKIC?

4. Consider the following problem discussed in class: • workers with productivity 0 € {1,2} with respective probabilities p and 1 P, education choice e = {0, 1} • costs for the two types are c(1) = and c(2) = ¾¼, • market pays expected wages. Let s denote the equilibrium probability with which type will choose e = 1. (a) Construct an equilibrium with st = s₂ = 0. (b) Under what conditions does the above equilibrium fail the CKIC?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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