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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?
Suppose a country's GDP equals $500 billion for a particular year. Economists in the country estimate that household production equals 40% of GDP. What is the value of the country's household production for that year. Counting both GDP and househo..
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suppose that you are hired as consultant to a firm producing a therapeutic drug protected by a patent that gives a firm
Draw a graph with real seignorage revenue on the vertical axis and inflation on the horizontal axis. Show the values of seignorage for inflation rates of 0, 0.02, 0.04, 0.06, c, 0.30.
Suppose that an oil well is expected to produce $100,000 of oil during its first year. What would be the present worth of the anticipated revenue stream at an interest rate of 10%, compounded annually over the next 5 years
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Is the firm maximizing its economic profit? How do you know? What should the firm do to maximize profit? Should it increase or decrease output?
determine how much the park could afford to spend now on the new technology, if the cost of annual consulting services will be reduced to $30,000 per year. assume the park uses an interest rate of 15% per year and it wants to recover its investmen..
(Amounts on the balance sheet are in millions of dollars.) Assets - Reserves $15.90 Loans $150.00 Securities $34.10 Total - $200.00 Liabilities + Capital - Transactions deposits $180.00 Equity capital $20.00 Total - $200.0 Calculate the bank's exc..
Although self-employed workers have the option to purchase private health insurance, many do not, due to adverse selection. Suppose half the population is healthy and half is unhealthy. The cost of getting sick is $1000 for the healthy and $10,000..
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