A simple economy has 2 sectors A and B, both of which use labour as an input in production. Both A and B jobs are equally desirable from the point of view of workers. Also, all workers have the potential to do either job. However, a training period must precede employment in either job. Suppose the training has to be financed by thefirm.

a. If the training periods for the two jobs are equal in length and cost, what is the equilibrium differential in earnings between the 2 jobs? Explain your answer.

b. If suppose starting from a point of equilibrium, the firms decide no longer to bear the expense of training and passes it on to the worker. What will happen to the wage rate of each sectors and why?

c. Use the same information as above where workers have to bear the expense for training. Now, if suppose sector B requires longer and more expensive training period than job A, what will be the impact of equilibrium earnings differential between the two jobs? Explain your answer.