The value of a worker's marginal product is $40 per hour for high-ability workers and $5 per hour for low-ability workers. The preferences of high-ability workers correspond to the utility function UH(E, W) = W - 5E, and the preferences of low-ability workers correspond to the utility function UL(E, W) = W - 8E. By law, everyone is required to attend at least ten years of school. Three-fourths of the population has low ability, and one-fourth has high ability. Would it be Pareto efficient for the government to ban schooling beyond 10 years rather than allow a separating equilibrium?
A. Yes, because both UL and UH would rise.
B. Yes, because although UH would fall, UL would rise.
C. No, because although UL would rise, UH would fall.
D. No, because both UL and UH would fall.
C. No, because although UL would rise, UH would fall.
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