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:

Credits

Entries in accounting that increase liabilities or equity accounts, or decrease asset or expense accounts, reflecting transactions.

Debits

Entries in accounting that are used to record increases in assets or expenses and decreases in liabilities, equity, and revenue.

Capital Balance

The amount of money that a business or individual has invested in an entity, not including profits or losses from operations.

Net Income

The residual profit of an enterprise after deducting all expenditures and tax payments from its overall revenue.