Figure 212 Shows the Benefit Functions for Low-Ability Workers and High-Ability

question 6

Multiple Choice

Figure 21.2 shows the benefit functions for low-ability workers and high-ability workers (A and B) ,along with one indifference curve for each worker type (C and D) .The employer cannot observe worker type directly but has created two positions,E and F,as a screening mechanism.Which of the following is true?

• A) Curve A is an indifference curve for a low-ability worker, and curve B is an indifference curve for a high-ability worker.
• B) Curve A is the benefit curve for high-ability workers, and curve B is an indifference curve for a high ability worker.
• C) Curve A is an indifference curve for a high-ability worker, and curve C is the benefit curve for high-ability workers.
• D) Curve A is the benefit curve for high-ability workers, and curve C is an indifference curve for a high ability worker.

---

Definitions:

Economic Growth

An increase in the production of economic goods and services, compared from one period of time to another, typically measured by GDP.

Less Developed Countries

Countries with a lower level of material wealth, economic activity, and quality of life, often characterized by low GDP per capita and human development indices.

Production Predominates

A condition where the manufacturing or creation of goods is the dominant economic activity in a particular area or sector.

Savings Rate

The percentage of income that is not spent on consumption but instead is saved or invested for future use.