Suppose that low-productivity workers all have marginal products of 8 and high-productivity workers all have marginal products of 16. The community has equal numbers of each type of worker. A firm cannot directly tell the difference between the two types of workers. Without any further information, the firm is willing to offer a wage at the average productivity. The local community college offers a course in microeconomics, which does not increase productivity for either type of workers. High-productivity workers think taking this course is as bad as a wage cut of $3, and low-productivity workers think it is as bad as a wage cut of $9. With the certificate, the firm is willing to offer a high wage of $16. Without it, the firm is willing to offer a low wage of $8. But the firm cannot still tell the true productivity. In this case, is it worth for the low-productivity workers taking the course? (Yes, No, or Uncertain) Thus, this situation will lead to a (pooling, or separating) equilibrium.
Suppose that low-productivity workers all have marginal products of 8 and high-productivity workers all have marginal products of 16. The community has equal numbers of each type of worker.
A firm cannot directly tell the difference between the two types of workers. Without any further information, the firm is willing to offer a wage at the average productivity.
The local community college offers a course in
With the certificate, the firm is willing to offer a high wage of $16. Without it, the firm is willing to offer a low wage of $8. But the firm cannot still tell the true productivity. In this case, is it worth for the low-productivity workers taking the course? (Yes, No, or Uncertain)
Thus, this situation will lead to a (pooling, or separating) equilibrium.
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