Suppose That in Enigma, Ohio, Klutzes Have a Productivity of $1,000

question 13

Multiple Choice

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month.You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity.Kandos, however, have more patience than klutzes.Listening to an hour of dull lectures is as bad as losing $150 for a klutz and $50 for a kando.There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month

• A)if 20 < H < 60.
• B)if 20 < H < 120.
• C)only in the limit as H approaches infinity.
• D)for all positive values of H.
• E)if 16.67 < H < 50.

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Definitions:

Economic Stability

A state where an economy experiences stable growth, low inflation rates, and low unemployment rates, contributing to overall economic health.

Economic Growth

A rise in the potential of an economy to output goods and services between one time frame and another.

Low Inflation

A situation characterized by a relatively slow rate of increase in the general price level of goods and services over a period of time.

Peer Effects

The influence that individuals exert on one another's behavior, choices, or performance in a social or work setting, often within similar age or professional groups.