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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 0. 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

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 0. 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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 0. 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 n?. These costs are also measured in widgets. What is the maximum level of education that Qualified workers will obtain, in a separating equilibrium? O 13.5 O 12 O 13 O 10
Transcribed Image Text: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 0. 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 n?. These costs are also measured in widgets. What is the maximum level of education that Qualified workers will obtain, in a separating equilibrium? O 13.5 O 12 O 13 O 10
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