Question
One type of worker has a marginal (constant) product equal to 10 and another type of worker has a marginal (constant) product equal to 15.
One type of worker has a marginal (constant) product equal to 10 and another type of worker has a marginal (constant) product equal to 15. There are 100 workers of each type. We initially assume that the company cannot distinguish between the two types of workers.
(a)If the labor market is competitive, the workers' wage would be equal to the average value of their marginal product. This amount is___________.
(b)Suppose that the local university residence hall teaches an evening course in microeconomics taught by Professor M. de Sade. Highly productive workers think that attending this course only means a 3-euro salary reduction, while unproductive workers think that it means a 6-euro salary reduction. Suppose that the firm can observe whether a particular individual is attending the course or not, but cannot directly observe the marginal product of the worker. The competitive salary of workers who attend the microeconomics course will be ___________ and the salary of workers who do not attend the microeconomics course will be ________________.
(c)If there is a separating equilibrium, such that highly productive workers attend the course while low-productive workers do not, the net benefits of taking the microeconomics course will be ____________ for highly productive workers and ___________ for low-productivity workers. Consequently (there will / will not be), ____________ such a separating equilibrium.
(d)Suppose they call on Professor De Sade from Madrid to give some lectures to a group of disputants on the economy of family values. His replacement is Professor Tremebunff, who prides himself on his ability to make economics "as simple as sociology and as fun as soap operas on TV." Tremebunff's claims are undoubtedly overblown, but the truth is that students prefer him to de Sade. Highly productive workers believe that attending the Tremebunff course is as bad as suffering a loss of wages of 1 euro, while low productive workers think that attending the course is as bad as suffering a cut in pay of 4 euros. If all the highly productive workers decide to attend the course and all the low productive ones decide not to attend, the competitive salary of the people who attend the microeconomics course will be __________ and the salary of the people who do not attend the course will be 10 euros. The salary of people who do not attend the course will be _______________.
(e)If there is a separating equilibrium such that highly productive workers follow the course while the unproductive ones do not, the net benefits of taking Professor Tremebunff's course would be ____________ for the highly productive workers and ____________ for the low productive ones. Consequently (there will / will not be), ______________ such a separating equilibrium.
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