Question
In Smalltownsville, there are two types of workers, good and bad. There is only one company where these workers can get employed. If they are
In Smalltownsville, there are two types of workers, good and bad. There is only one company where these workers can get employed. If they are not hired by this company, they collect their outside option - $20 for good workers and $15 for bad workers. Good workers produce $32 for the company and bad workers produce $20. University has no effect on productivity, but it is costly for workers to attend uni: the cost is $10 for good workers and $20 for bad. The company would like to hire only good workers. Suppose it offers a wage of w to those workers who have gotten a uni education, and offers no jobs to everyone else. What range of wages induces only good workers to go to uni and makes positive profits for the company?
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