1.Assume that there are two types of workers, Bright (B) and Dull (D).Productivities of Type-B workers and Type-D workers are 10 and 5, respectively.Workers know their own type, but this piece of information is not known to the employers.The costs of education facing D and B are CD=3+y/2 and CB=3+y/3, where y is the years of education.What is the range of hiring standards that allows employers to sort out good workers?

2.Suppose the government decides to provide workers with a lump-sum subsidy of $1 to reduce their costs of education.What would the effect on the hiring standard be?Specifically, obtain the new range of hiring standards that allows employers to sort out good workers.