In a Situation Where Workers Have More Information About Their

question 5

Multiple Choice

In a situation where workers have more information about their own talents than do employers,workers cannot simply announce their relative abilities because:

• A) both high- and low-ability workers have an incentive to announce they are high ability.
• B) firms are incapable of screening workers.
• C) workers cannot signal.
• D) signaling is costly.
• E) announcing these abilities is costly.

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Definitions:

Individual Demand Curve

A graphical representation showing the quantity of a goods or services a single consumer is willing and able to purchase at various prices.

Budget Constraints

The limitations on the spending behavior of consumers, based on their income and the prices of goods and services.

Indifference Curves

Representations on a graph showing combinations of goods or services between which a consumer is indifferent, meaning they have no preference for one combination over another.

Elasticity

Elasticity refers to the degree to which demand or supply reacts to changes in price or other factors.