Suppose That Low-Productivity Workers All Have Marginal Products of 10

question 1

Multiple Choice

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers have marginal products of 16.The community has equal numbers of each type of worker.The local community college offers a course in microeconomics.High-productivity workers think taking this course is as bad as a cut in wages of $4 and low-productivity workers think it is as bad as a wage cut of $8.

• A)There is a separating equilibrium in which high-productivity workers take the course and are paid $16 and low-productivity workers do not take the course and are paid $10.
• B)There is no separating equilibrium and no pooling equilibrium.
• C)There is no separating equilibrium, but there is a pooling equilibrium in which everybody is paid $13.
• D)There is a separating equilibrium in which high-productivity workers take the course and are paid $20 and low-productivity workers do not take the course and are paid $10.
• E)There is a separating equilibrium in which high-productivity workers take the course and are paid $16 and low-productivity workers are paid $13.

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Definitions:

Contracting Parties

The entities or individuals who enter into a contractual agreement, each undertaking obligations to be fulfilled as per the contract terms.

Trucking Line

A company engaged in the business of transporting freight over long distances using trucks.

Risk of Loss

The liability concern over who bears the loss if goods are damaged or destroyed during a transaction before the buyer receives them.

Tendered to the Buyer

The act of offering or presenting goods to a buyer in fulfillment of a contract or an order.