There are two types of worker,high ability and low ability.High ability workers generate gross profit of A on the job and low ability generate nothing.Education does not make workers more productive,but is costly to obtain (c_H for high ability workers and c_L for low ability ones).Let w be the wage that all firms in the economy pay by regulatory mandate.Suppose the worker obtains utility given by the wage (if the worker is employed,0 if not)minus the cost of education (if any).There is no disutility from work.Which condition is required if only the high ability type is to obtain an education in equilibrium? A) c_H

Question

There are two types of worker,high ability and low ability.High ability workers generate gross profit of A on the job and low ability generate nothing.Education does not make workers more productive,but is costly to obtain (c_H for high ability workers and c_L for low ability ones).Let w be the wage that all firms in the economy pay by regulatory mandate.Suppose the worker obtains utility given by the wage (if the worker is employed,0 if not)minus the cost of education (if any).There is no disutility from work.Which condition is required if only the high ability type is to obtain an education in equilibrium? A) c_H < w < c_L.. B) c_L < w < c_H. C) c_H < c_L < w. D) c_L < c_H < w.

Quizplus · Accepted Answer

For only high ability workers to obtain education, the cost of education for high ability workers (c_H) must be less than the wage (w), and the wage must be less than the cost of education for low ability workers (c_L). This ensures that high ability workers find it beneficial to get educated and earn the wage, while low ability workers do not find it worthwhile to incur the cost of education.

There Are Two Types of Worker,high Ability and Low Ability