In a Labor-Market Pooling Equilibrium with High-Skill and Low-Skill Workers

question 107

Multiple Choice

In a labor-market pooling equilibrium with high-skill and low-skill workers and where a costly educational degree is used as a signaling device,all else equal,an increase in the wage differential between high- and low-skill workers leads to

• A) an increase in the required minimum share of high-skill workers.
• B) a decrease in the required minimum share of high-skill workers.
• C) no change in the required minimum share of high-skill workers.
• D) None of the above answers are correct.

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Definitions:

Saturation

The intensity or purity of a color, indicating the absence of white light.

Iris

The colored part of the eye surrounding the pupil, responsible for controlling the diameter and size of the pupil and thus the amount of light reaching the retina.

Pupil

The opening in the center of the iris of the eye, which regulates the amount of light that enters the eye.

Retina

A thin layer of tissue at the back of the eye that contains cells sensitive to light, which trigger nerve impulses that pass via the optic nerve to the brain, where a visual image is formed.