3 An economy with competitive markets has 2 kinds of jobs, Routine & Skilled. There are 2 types ofworkers, Qualified & Unqualified. 60% of workers are Qualified while 40% are unqualified.In a Routine job, both types of workers produce 10 widgets. In a Skilled job, Qualified workersproduce 100 widgets each, while Unqualified workers produce 0.Labor markets are competitive, so each worker is paid their marginal product, i.e. how much theyproduce, in widgets.Everyone looks great in an interview, so companies must hire without knowing the worker's typeand must pay the first period's wage without knowing their actual output. However, Qualifiedworkers can signal their qualification by receiving an education. For a Qualified worker, the cost ofgetting educated to level n is 0.5n2. For an Unqualified worker, it is n2. These costs are also measuredin widgets.If the formal education system were abolished, so that no-one could receive an education, whowould be made better off, in terms of their net earnings? Who would be made worse off?O Both types would be made worse offBoth types would be made better offO Qualified would be better off, Unqualified worse offO Unqualified would be better off, qualified would be worse off

Here in an economy with competitive markets has 2 kinds of jobs, Routine & Skilled. There are 2…

Answered: O Both types would be made worse off O…

O Both types would be made worse off O Both types would be made better off O Qualified would be better off, Unqualified worse off O Unqualified would be better off, qualified would be worse off

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

An economy with competitive markets has 2 kinds of jobs, Routine & Skilled. There are 2 types of
workers, Qualified & Unqualified. 60% of workers are Qualified while 40% are unqualified.
In a Routine job, both types of workers produce 10 widgets. In a Skilled job, Qualified workers
produce 100 widgets each, while Unqualified workers produce 0.
Labor markets are competitive, so each worker is paid their marginal product, i.e. how much they
produce, in widgets.
Everyone looks great in an interview, so companies must hire without knowing the worker's type
and must pay the first period's wage without knowing their actual output. However, Qualified
workers can signal their qualification by receiving an education. For a Qualified worker, the cost of
getting educated to level n is 0.5n2. For an Unqualified worker, it is n2. These costs are also measured
in widgets.
If the formal education system were abolished, so that no-one could receive an education, who
would be made better off, in terms of their net earnings? Who would be made worse off?
O Both types would be made worse off
Both types would be made better off
O Qualified would be better off, Unqualified worse off
O Unqualified would be better off, qualified would be worse off

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