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

question 16

Multiple Choice

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 12.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 $5, and low-productivity workers think it is as bad as a wage cut of $9.

• A)There is no separating equilibrium, but there is a pooling equilibrium in which everybody is paid $11.
• B)There is a separating equilibrium in which high-productivity workers take the course and are paid $12 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 $17 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 $12 and low-productivity workers are paid $11.

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