Suppose there are two types of workers. Type 1 workers have a marginal product of labor(MPL) = 1. That is, if a firm hires an extra Type I worker, that worker will produce 1 extra unitof output. Type II workers have a MPL = 2. The firm can sell each extra unit of output for P= $12,000.Firms are unable to identify whether or not a worker is Type I or Type Il unless the workersends a signal of what type they are. The signal that workers can send is a level ofeducation, e. The firm adopts the following hiring strategy:If e >e* then offer the worker a wage rate equal to $24,000.If e < e* then offer the worker a wage rate equal to $12,000.The cost to Type I workers of getting education level e is $4000*e. The cost to Type IIworkers of getting education level e is $2000*e. If the firm sets e* = 8, which of the followingstatements is true?O Type I workers will not get e*, but Type II workers will get e*, which means there is a separatingequilibrium.O Neither type of workers will get e* which means there is a pooling equilibrium.O Both types of workers will get e* which means there is a pooling equilibrium.O Both types of workers will get e* which means there is a separating equilibrium.O Neither type of workers will get e* which means there is a separating equilibrium.

In economics, the concept of signaling has 2 types of equilibrium, one is separating equilibrium in…

The cost to Type I workers of getting education level e is $4000 e. The cost to Type II workers of getting education level e is $2000*e. If the firm sets e* = 8, which of the following statements is true? Type I workers will not get e", but Type Il workers will get e*, which means there is a separating equilibrium. Neither type of workers will get e* which means there is a pooling equilibrium. Both types of workers will get e* which means there is a pooling equilibrium. Both types of workers will get e* which means there is a separating equilibrium. Neither type of workers will get e* which means there is a separating equilibrium.

The cost to Type I workers of getting education level e is $4000 e. The cost to Type II workers of getting education level e is $2000e. If the firm sets e = 8, which of the following statements is true? Type I workers will not get e", but Type Il workers will get e, which means there is a separating equilibrium. Neither type of workers will get e which means there is a pooling equilibrium. Both types of workers will get e* which means there is a pooling equilibrium. Both types of workers will get e* which means there is a separating equilibrium. Neither type of workers will get e* which means there is a separating equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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