The Value of a Worker's Marginal Product Is $50 Per

question 56

Multiple Choice

The value of a worker's marginal product is $50 per hour for high-ability workers and $15 per hour for low-ability workers.The preferences of high-ability workers correspond to the utility function U_H(E,W) = W - 4E,and the preferences of low-ability workers correspond to the utility function U_L(E,W) = W - 10E.By law,everyone is required to attend at least ten years of school.Three-fifths of the population has low ability,and two-fifths has high ability.Would it be Pareto efficient for the government to ban schooling beyond 10 years rather than allow a separating equilibrium?

• A) Yes, because both U_L and U_H would rise.
• B) Yes, because although U_H would fall, U_L would rise.
• C) No, because although U_L would rise, U_H would fall.
• D) No, because both U_L and U_H would fall.

---

Definitions:

Products

The substances that are formed as a result of a chemical reaction.

Major Organic Product

The primary product resulting from an organic reaction, typically the one in greatest yield or of greatest importance.

Mechanism

The detailed step-by-step description of how a chemical reaction occurs at the molecular level.

Reaction

A process that results in the chemical transformation of one set of chemical substances to another.