In a labor-market separating equilibrium with high-skill and low-skill workers and where a costly educational degree is used solely as a signal device,we can say that
A) education is socially inefficient because it is costly and provides no useful skills to the worker.
B) education is socially efficient.
C) education is privately inefficient for high-skill workers.
D) education is privately useful for low-skill workers only.

Question

Quizplus · Accepted Answer

In a separating equilibrium where education serves solely as a signal, it is considered socially inefficient because it incurs costs without imparting useful skills. The primary function of obtaining the degree is to differentiate high-skill workers from low-skill workers, not to enhance productivity or skill sets.

In a Labor-Market Separating Equilibrium with High-Skill and Low-Skill Workers