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From part c on, suppose that everyone's book-writing ability is the same. They would all write 5 books per year. Everyone's athletic ability, however, is
From part c on, suppose that everyone's book-writing ability is the same. They would all write 5 books per year. Everyone's athletic ability, however, is random. In other words, the number of sports games each worker can produce is randomly determined. The graph below represents worker ability. X X X X X X X A X '1': . . E equal 1 ome Que X X X X X X X X ' ) ln(5) ln(B) c) Who will choose to become athletes? (Hint: The workers on which side of the equal income line?) (2 pts) (1) Who will choose to become authors? (Hint: The workers on which side of the equal income line?) (2 pts) e) Below are four sets of wages. 1. The income from playing sports games, earned by those who choose to be athletes 2. The income from writing books, earned by those who choose to be authors 3. The income from playing sports games, earned by those who choose to be authors 4. The income from writing books, earned by those who choose to be athletes We can only observe workers' income after they have made their career decision. i) Which wages can we observe? (2 pts) ii) Which wages can we not observe? (2 pts)
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