When Employers Sort Employment Applications into High-Ability and Low-Ability People

question 81

Multiple Choice

When employers sort employment applications into high-ability and low-ability people based on the attainment of a college degree (irrespective of major) ,they are providing evidence in support of the

• A) human-capital theory of education.
• B) signaling theory of education.
• C) principle that education reduces marginal productivity.
• D) principle that most business owners are more interested in discriminating against a particular group than in maximizing profits.

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Definitions:

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged.

Prisoner's Dilemma

A fundamental problem in game theory that demonstrates why two rational individuals might not cooperate, even if it appears that it is in their best interest to do so.

Dominant Strategy

A strategy in game theory that is best for a player, regardless of the strategies chosen by the other players.

Maximum Profits

The highest amount of earnings achievable by a firm when marginal costs equal marginal revenue.