1 Q1 Signaling when education is productive INow suppose that there are two groups of workers: H types (higher productivity) and L types(lower productivity). Let CH (e) denote a Type H worker's cost function for obtaining educationand let cL(e) denote the cost function for a Type L worker. mH(e) is the marginal product oflabor for a Type H worker and mL(e) is the marginal product for a Type L worker.A fraction p are Type H and the other 1 –p workers are Type L. As usual, the utility that aworker receives from working is the wage minus cost:u(e) = w(e) – c(e)In the following two parts of this problem, you will be given different sets of cost functions,marginal product values, and a value for p. Q1.3Cost functions:CL(e) = 0.75 - e?сн (е) — 0.25 - е?.%3DMarginal products:mı(e) = 2.eтн(е) — 4- еShare of workers that are Type H:p= 0.25What is the minimum value of ē that could be consistent with a separating equilibrium? Roundyour answer to at least three decimal places.Q1.4Using the same numbers and cost functions from the previous question, what is the maximumvalue of ē that could be consistent with a separating equilibrium? Round your answer to at leastthree decimal places.

Given information 2 types of worker High ability worker Low ability worker Cost function CL=0.75e2…

Q1 Signaling when education is productive III Now suppose that there are two groups of workers: H types (higher productivity) and L types (lower productivity). Let CH (e) denote a Type H worker's cost function for obtaining education and let CL(e) denote the cost function for a Type L worker. mH(e) is the marginal product of labor for a Type H worker and mL(e) is the marginal product for a Type L worker.

Q1 Signaling when education is productive III Now suppose that there are two groups of workers: H types (higher productivity) and L types (lower productivity). Let CH (e) denote a Type H worker's cost function for obtaining education and let CL(e) denote the cost function for a Type L worker. mH(e) is the marginal product of labor for a Type H worker and mL(e) is the marginal product for a Type L worker.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.8P

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