Reference no: EM13974955
Asymmetric information and labor markets
Andrew is the manager of a factory. Workers at the factory are assigned to one of two tasks, one of which requires skilled labor and one of which requires unskilled labor. Because skilled workers earn a higher wage than unskilled workers, everyone who applies for a job says they're skilled. Andrew's challenge is to figure out who is actually a skilled worker and who is an unskilled worker.
Suppose that Andrew would like to use the economic concept of screening to separate out worker types.
Which of the following scenarios illustrates this concept?
Andrew voluntarily pays all workers a higher wage in hopes of attracting and retaining more productive workers.
Andrew implements a test to determine whether applicants are skilled or not.
Skilled workers pay to take a certification course to demonstrate their ability.
Suppose, instead, the manager considers paying efficiency wages to increase the factory’s profitability.
True or False: Efficiency wages are set equal to the average industry wage and are intended to weed out workers who are only interested in money.
True
False
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Asymmetric information and labor markets
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