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2. (This is Problem 902 in the textbook). An economy has two types of jobs, Good and Bad, and and two types of workers, Qualified
2. (This is Problem 902 in the textbook). An economy has two types of jobs, Good and Bad, and and two types of workers, Qualified and Unqualified. The population consists of 60% Qualified and 40% Unqualified. In a Bad job either type of worker produces 10 units of outputs. In a Good job, a Qualified worker produces 100 units of output and an Unqualified worker produces 0. There is enough demand for worker that for each type of job, companies must pay what they expect the appointee to produce. Companies must hire each worker without observing his type and pay him before knowing his actual output. But Qualified worker can signal their qualification by getting educated. For a Qualified worker, the cost of getting educated to level n is " whereas for an Unqualified worker, it is n'. These costs are measured in the same unit as output, and n must be an integer. (a) What is the minimum level of n that will achieve separation of types? (b) Now suppose that the signal is made unavailable. Which kind of job will be filled by which types of workers and at what wage? Who will gain and who will lose from this change
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