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Question Three (Market power from price ignorance) The Federal Trade Commission objected to the California Dental Association's prohibitions against its members engaging in advertising about

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Question Three (Market power from price ignorance) The Federal Trade Commission objected to the California Dental Association's prohibitions against its members engaging in advertising about prices, calling them restraints on trade. What effect should such restraints have on equilibrium prices? Question Four (Problems arising from ignorance when hiring) Suppose that you are given wh, w; and 6 in the education signalling model. For what value of c are both a pooling equilibrium and a separating equilibrium possible? For what value of c are both types of equilibria possible, and do high-ability workers have higher net earnings in a separating equilibrium than in a pooling equilibrium? (H int: See Solved Problem 18.4.)

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