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

question 4

Multiple Choice

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 16.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 $2, and low-productivity workers think it is as bad as a wage cut of $6.

• A)There is no separating equilibrium, but there is a pooling equilibrium in which everybody is paid $13.
• B)There is a separating equilibrium in which high-productivity workers take the course and are paid $18 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 $16 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 $16 and low productivity workers are paid $13.

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Definitions:

Top Marginal Tax Rate

The highest tax rate applied to the last dollar of taxable income, affecting the highest income earners within a progressive tax system.

1980

A year marked by significant global events including the eruption of Mount St. Helens and the election of Ronald Reagan as the President of the United States.

Government Ownership

The possession and control over enterprises and assets by the state or government, rather than private individuals or organizations.

Federal Government

The federal government refers to the national government of a country that is responsible for enacting and enforcing laws, collecting taxes, and managing the country’s affairs.