What is the minimum level of s that will achieve separation

Assignment Help Econometrics

Reference no: EM131209558

There are two types of jobs in the economy, good and bad, and two types of workers, qualified and unqualified. The population consists of 60 percent qualified and 40 percent unqualified. In a bad job, either type of worker produces the same 10 units of output. In a good job, a qualified worker produces 100 and an unqualified worker produces 0. There are numerous job openings of each type, and companies must pay for each type of job what they expect the appointee to produce. The worker's type is unknown before hiring, but the qualified workers can signal their type (e.g., by getting educated or some other means). The cost of signaling to level s for a qualified worker is s²/2 and for an unqualified worker is s². The signaling costs are measured in the same units as output, and s must be an integer (e.g., number of years of education).

a. What is the minimum level of s that will achieve separation?

b. Suppose that the signal is no longer available. Which kinds of job will be filled by which types of workers, and at what wages? Who gains and who loses?

Reference no: EM131209558

Questions Cloud

How much do the consumers value a non defective car : In the preceding question, assume that new cars sell for $18,000 and used cars sell for $2,000. If there is no depreciation and risk-neutral consumers know that 20 percent of all new cars are defective, how much do the consumers value a non defect..

Develop the weighted average cost of capital : Develop the Weighted Average Cost of Capital (WACC) for a business. Given the following inputs and assumptions, estimate the WACC for Gallo Distributors, Inc.:

Discuss how each of the risks can affect the project team : Identify some of the positive and negative risks associated with this project,and then rank these risks based on their level of priorities. Discuss how each of these risks can affect the project team.

Implement (simplified) ftp server and ftp client : CPSC-471, Fall 2015 - In assignment, you will implement (simplified) FTP server and FTP client. The client shall connect to the server and support uploading and downloading of files to/from server.

What is the minimum level of s that will achieve separation : Suppose that the signal is no longer available. Which kinds of job will be filled by which types of workers, and at what wages? Who gains and who loses?

Aware of the potential increase : Over the past decades, companies have become more aware of the potential increase in sales that may occur by extending products and services to foreign markets.

Effective annual rate charged on car loan : 1. What is the effective annual rate charged on this car loan? 2. What would be Prof. Finance's monthly payment under this loan?

Define forward and futures and option agreements : What are derivatives? Define forward, futures, and option agreements. - What are the underlying instruments in these agreements?

Research topic - wto objectives and policies : There is one research topic and it's of 3000 words. It's the international trade and enterprises. The topic is WTO- Objectives, Policies and winners or losers (2 to 3 countries) under WTO

User Account

All Pages