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If a pool of workers, 60% are Low-productivity workers with an estimated present value of lifetime output equal to $180,000. The rest (40%) are High-productivity workers with an estimated present value of lifetime output equal to $290,000.
a) Given the asymmetric information situation a prospective employer faces in hiring from this labor pool, what is the average salary that they would pay without a signal?
b) If employers estimate that the marginal cost of schooling is $32,000 for Low-productivity workers and $22,000 for High-productivity workers, then what is the range of threshold-years of schooling that employers can use to decide whether or not to pay a worker the higher salary (equal to their estimated lifetime output).
c) Does the range of threshold-years change if the marginal cost of schooling is estimated to be equal between the worker types? What happens to the threshold if the marginal cost of schooling is $25,000 for both types?
d) Does the range of threshold-years change if there are an equal number of workers of each type in the pool? Why or why not?
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If a representative company with long run total cost given through TC = 50 + 2q + 2q2 operates in a competitive industry where the market demand is given through QD = 1,500 - 40P,
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A major step toward mastering the economic way of considering is learning to reason in terms of supply and demand. I have listed many questions below to answer and practice these ideas.
To prevent gasoline values from having devastating effects on economy it has been proposed that all gasoline values in U.S. be fixed at the average value for the past 2-years.
Consider the relationship given by QCars = 100 + 4xPCars - 2xPSteel - 0.2xPWorkers, where QCars is the quantity of cars (in thousands), PCars is the price of cars and PWorkers is the wage earned by autoworkers.
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