Suppose All Workers in a Certain Labor Market Are of Either

question 17

Multiple Choice

Suppose all workers in a certain labor market are of either high quality or low quality.Potential employers value a high-quality worker at $15,000 per month and a low-quality worker at $7,500 per month.The monthly supply of high-quality workers is Q^s_H = 0.04(W - 1,500) and the supply of low-quality workers is Q^s_L = 0.08(W - 1,500) ,where W is the monthly wage.If workers' abilities are observable to employers,what are the equilibrium wages?

• A) W_H = $15,000; W_L = $7,500
• B) W_H = $7,500; W_L = $7,500
• C) W_H = $12,500; W_L = $12,500
• D) W_H = $5,250; W_L = $4,500

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Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, such as labor, keeping other factors constant.

Resource

An asset or input that is utilized in the production of goods and services, such as labor, capital, and raw materials.

Units

Basic quantities or measurements used to express a variable or to quantify the elements in an analysis.

Employed

Refers to individuals who are currently working in a paid job or running a business.