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

question 1

Multiple Choice

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers 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 cut in wages of $4 and low-productivity workers think it is as bad as a wage cut of $8.

• A)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.
• B)There is no separating equilibrium and no pooling equilibrium.
• C)There is no separating equilibrium, but there is a pooling equilibrium in which everybody is paid $13.
• D)There is a separating equilibrium in which high-productivity workers take the course and are paid $20 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:

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Futures Contracts

Agreements, enforceable by law, to acquire or dispose of certain commodities or financial assets at a price agreed upon now, to be transacted at a later date.

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Hedge cost risk refers to the potential variability in the expense of hedging strategies, which are used to mitigate financial risks associated with currency, interest rates, or commodities.

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A unit of volume that is used primarily in the United States to measure quantities of agricultural commodities and dry goods.