Question 2 2. (10 marks) Suppose there are two types of persons, high-ability and low-ability. A particular degree costs, in terms of both monetary and psychic costs, a high-ability person $40,000 and costs a low- ability person $80,000. Firms wish to use education as a screening device where they intend to pay $90,000 (life-time earnings) to workers without a diploma and $K to those with a diploma. a) In what range must K be to make this an effective screening device? b) What level of K would result in either type not getting an education? c) Comment on the required relationship between productivity and costs for signalling to work and thus have value