Suppose that both high-ability and low-ability workers can get an education, but it costs a low-ability worker four-times as much to get the same education. So, an education costs a high-ability worker 'c' dollars and a low-ability worker '4c' dollars. What is the smallest value of 'c' at which a separating equilibrium exists?
Suppose that both high-ability and low-ability workers can get an education, but it costs a low-ability worker four-times as much to get the same education. So, an education costs a high-ability worker 'c' dollars and a low-ability worker '4c' dollars. What is the smallest value of 'c' at which a separating equilibrium exists?
Chapter1: Making Economics Decisions
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Suppose that both high-ability and low-ability workers can get an education, but it costs a low-ability worker four-times as much to get the same education. So, an education costs a high-ability worker 'c' dollars and a low-ability worker '4c' dollars. What is the smallest value of 'c' at which a separating equilibrium exists?
Transcribed Image Text:6: Suppose high-ability workers generate $80,000 for a firm, and low-ability workers
generate $40,000. There are many (unlimited) firms. Half of workers are high-ability
and half are low-ability. Firms can observe education but not ability.
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