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Suppose that there are two types of workers Group A (high skily and Group B (low skill), Variable y represents the number of years of
Suppose that there are two types of workers Group A (high skily and Group B (low skill), Variable y represents the number of years of education, For workers in Group A (high on the cost of attaining an educational level y is Aly$10y, for workers in Group B (low skilt) the cost of attaining an educational level yis Cely)=$1&y. The worker's skill is private information (only the worker known her own skilll). The firms can observe the years of education of a worker but not her skill Suppose that firms are advertising the following jobs. If a worker han ya 2 years of education or moro, then the worker will receive a wage $90. It the worker has less than yo2 years of education, then the worker will receive a wago $40 Workers can choose whether to go to school for y=2 years and then obtain the higher wape or choose not to go to school (y=0) and obtain the lower wage Job Select Two of False for each statement 1) Workers in Group A (high akm) will choose to go to school for y=2 years. Fale 2) Workers in Group B (low skill) will choose not to go to school (yo) Falso 3) Firms canine yu2 years of education as a market signal of the skil of the workers. True V
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