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

question 4

Multiple Choice

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all 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 wage cut of $2, and low-productivity workers think it is as bad as a wage cut of $6.

• A)There is no separating equilibrium, but there is a pooling equilibrium in which everybody is paid $13.
• B)There is a separating equilibrium in which high-productivity workers take the course and are paid $18 and low-productivity workers do not take the course and are paid $10.
• C)There is no separating equilibrium and no pooling equilibrium.
• D)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.
• 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:

Pension Expense

represents the cost incurred by an employer for maintaining a retirement benefits plan for its employees over a specific period.

Defined Benefit Pension Plan

A type of pension plan where an employer promises a specified pension payment upon retirement, determined by an employee's earnings history, tenure of service, and age.

Interest Cost Component

The portion of pension expense that reflects the increase in the projected benefit obligation due to the passage of time.

Defined Benefit Pension Plan

A defined benefit pension plan is a retirement plan where the employer promises a specified pension payment upon retirement, based on an employee's earnings history, tenure of service, and age.