# Question: Consider Kremers 0 ring model There are 4 workers in this

Consider Kremers 0-ring model. There are 4 workers in this economy, Jack, Fred, Melbaand Daphne. Suppose that there are two firms and each firm hires only two workers ,each workers , each of whom has skill level equal to q (q is assumed to lie between 0 and 1, with 1 being the highest skill level. Two of the workers (Jack and Melba) are highly skilled (q = 0.9); the other two (Fred and Daphne) are less skilled (q = 0.3). Output is given by the product of the q-levels for example firm 1 might hire a high skill worker and a low skill worker. Output of this firm would be 0.9*0.3= 0.27

Calculate the total output that would be produced by these two firms under each of the following scenarios:

Firm A hires Jack and Fred and Firm B hires Melba and Daphne.

Firm A hires Jack and Melba and Firm B hires Fred and Daphne

Under which scenario is output highest?

(a) Repeat the above calculations but with highly skilled workers having a q value of 0.6 and low skill workers 0.5. How do your results differ from those in part a?

(b) What do these results suggest about sorting of workers in an economy?

Calculate the total output that would be produced by these two firms under each of the following scenarios:

Firm A hires Jack and Fred and Firm B hires Melba and Daphne.

Firm A hires Jack and Melba and Firm B hires Fred and Daphne

Under which scenario is output highest?

(a) Repeat the above calculations but with highly skilled workers having a q value of 0.6 and low skill workers 0.5. How do your results differ from those in part a?

(b) What do these results suggest about sorting of workers in an economy?

## Relevant Questions

Consider the following income distributions:A) Plot the Lorenz Curves for 1990 and for 2000. Be sure to label your graph clearly.B) Calculate the Gini coefficient for 1990 and for 2000 (the area between the Lorenz curve and ...A construction firm considers whether or not to undertake a project to build a new retail outlet (shopping centre). The construction is to be undertaken in period t = 0. The construction costs are subject to risks ...Create an analogy or metaphor that explains how banks create and destroy money – one that would be understood by someone with absolutely no background in economics.1. Select any two integers between -12 and +12 which will become solutions to a system of two equations.2. Write two equations that have your two integers as solutions. Show how you built the equations using your integers. ...What impacts does currency fluctuations have on trade?Post your question