Suppose 10% of All Workers Are of High Ability

question 114

Essay

Suppose 10% of all workers are of high ability.If a firm knows a worker's ability,workers of low ability are paid $20,000 and workers of high ability are paid $30,000.A college degree can signal ability,and the cost of the degree is $11,000.Will there be a pooling equilibrium or a separating equilibrium?

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Definitions:

Attitudes

Psychological tendencies expressed by evaluating a particular entity with some degree of favor or disfavor.

Conflict

A situation or internal state of discord arising from opposing or incompatible forces, desires, or interests.

Effort Justification

A phenomenon in which individuals rationalize the effort they put into a task by increasing their liking for the outcome, even if it's not what they desired.

Conceptual Validation

The process of confirming that a theoretical concept is accurately reflected or represented in a research study or application.