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

question 18

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.What is the most efficient separating equilibrium?

• A) E_L = 13.5; E_H = 13.5
• B) E_L = 10; E_H = 13.5
• C) E_L = 13.5; E_H = 16.125
• D) E_L = 10; E_H = 10

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Definitions:

Class Conflict

The tension or antagonism that exists in society due to competing socioeconomic interests and desires between people of different classes.

Alienation

The feeling of being isolated and disconnected from one’s community, work, or sense of self, often discussed in social, economic, and psychological contexts.

Exploitation

The act of using someone or something unfairly for one's own advantage, often in a manner that is unethical or unjust.

Ideology

a system of ideas, values, and beliefs that influences the way individuals view the world and their place in it, often associated with political or social movements.