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Please help me out with this question. Thank you very much! 2. (30 points) Say that there are two types of individuals in the market,

Please help me out with this question. Thank you very much!

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2. (30 points) Say that there are two types of individuals in the market, skilled and unskilled. The yearly labour supply of all individuals is given by h*(w) = 5 (e.g., always work 5 hours). There are currently 50 skilled and 50 unskilled workers in the economy. Labour markets are competitive and firms sell their output for $10 per unit. There are 10 firms in the economy, each one with a (yearly) production technology of f(Is, lu) = 2Vis + Vlu where Is respresents the labour supplied by skilled workers and lu the labour supplied by unskilled workers. a. (10 points) Find the equlibrium wage of skilled and unskilled workers. b. (20 points) Suppose that (infinitely lived) unskilled workers could become skilled workers if they get a union competency certificate. This certificate is granted immediately but costs $10. Individuals have a discount factor of B = 0.95. Would the equilibrium wages of skilled workers be above or below $1.70 in this economy? [Note: the wages you found in part (a) are yearly "hourly" wages (i.e., their yearly wage will be five times their wage since they work 5 "hours"). Also, take this question one step at at time, it is not as hard as it might seem at first glance!]

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