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Question 7, Text Exercise 5.4 HW Score: 90.91%, 10 of 11 points Save Part 1 of 2 Points: 0.5 of 1 Suppose that you are
Question 7, Text Exercise 5.4 HW Score: 90.91%, 10 of 11 points Save Part 1 of 2 Points: 0.5 of 1 Suppose that you are given wh, w, and 0 in the education signaling model. For what value of c are both a pooling equilibrium and a separating equilibrium possible? In this problem, w is the value of the output that a high-ability worker produces for a firm, w is the value of the output that a low-ability worker produces for a firm, 0 is the share of the workforce with high ability and (1 -0) is the share with low ability, and c is the cost of getting a degree in school for high-ability individuals. In this model, low-ability individuals cannot obtain a degree. Both a pooling equilibrium and a separating equilibrium are possible if the cost of signaling high-ability with a degree for high-ability individuals is c such that OA. W - W > c > (1 -0)(wh - w/). OB. Wh - W > c >O (Wr - w/ ). O c. Wh - W> c > (1 - 0 ) (w - w). OD. W - W > c > (1 -@)(wh - w). OE. Wh > c >w
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