Q1: Signalling model: Suppose that there are two types of people in the world: high-ability and low-ability. Also suppose that education does not increase an individual's marginal productivity and that for both types education is costly. For the high-ability the cost of going to school for e years is e. The low-ability types find the school to be more costly and for them the cost of e years of school is 2e. There are two different types of firms. Firm 1 offers to pay workers such that the present discounted value of their lifetime earnings is $16 if workers have at least 6 years of schooling, and $8 to all other workers. Firm 2 offers to pay workers such that the present discounted value of their lifetime earnings is $16 if workers have at least 2 years of schooling, and $8 to all other workers. a. For each firm separately, analyse whether its educational requirements will enable them to distinguish between high- and low-ability types. b. In the long run, why will firm 1 have to lower its educational requirement from the present level? What is the minimum educational requirement a firm can offer and still expect to be able to distinguish between high- and low-ability types given the wage scale