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Answer the question regarding the labor market model when r(0) = $0 and 0 E {1,2} with Prob(0 = 1) = Prob(0 = 2) =

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Answer the question regarding the labor market model when r(0) = $0 and 0 E {1,2} with Prob(0 = 1) = Prob(0 = 2) = 1/2, where r(0) denotes the reservation wage of a worker with productivity 0. (1) Derive all competitive equilibria in the market. (2) Discuss the efficiency for each competitive equilibrium obtained in (1)

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