The cost, c, of a college education that serves only as a signal of a high-quality worker is $20,000. The wage of a known high-quality worker, wh, is $75,000. The wage for a known low-quality worker, wl, is $50,000
For what value of the share of the work force that is of high quality, t, is a pooling equilibrium possible?
The high-quality workers will not go to college if wh - (t ? wh + (1 - t)wl) < c. This can be rearranged so that t > 1 - c/( wh - wl). By substituting in the numbers, t > 1/5 will result. Thus, with a share of the work force that is high quality that is greater than 1/5, a pooling equilibrium can result.
You might also like to view...
Since World War II, the likelihood that foreign markets would gain importance to average exporters as a source of profits has
A) remained constant. B) increased. C) decreased. D) fluctuated widely with no clear trend. E) increased slightly before dropping off.
A price floor set below the equilibrium price will cause which of the following?
A) an increase in demand B) a shortage C) a surplus D) none of the above
Use the above figure. The total revenue earned by the monopolistically competitive firm is
A. $285. B. $180. C. $300. D. $255.
The country of Old Jersey produces milk and butter, and it has published the following macroeconomic data, where quantities are in gallons and prices are dollars per gallon.
Between Year 1 and Year 2, the GDP deflator (based on Year 1 as a base year) rose
A. 83.33%. B. 81.25%. C. 123.00%. D. 60.00%.