Question: 2. The figure shows the demand for and supply of low-skilled labour. The value of marginal product of high-skilled workers is $8 an hour greater

2. The figure shows the demand for and supply of low-skilled labour.

Wage rate (dollars per hour) 10 Co 60 4 2 0 2

The value of marginal product of high-skilled workers is $8 an hour greater than that of lowskilled workers. (The value of marginal product at each employment level is $8 greater than that of a low-skilled worker.) The cost of acquiring the skill adds $6 an hour to the wage that must be offered to attract high-skilled labour.

a. What is the wage rate of low-skilled labour?

b. What is the quantity of low-skilled labour employed?

c. What is the wage rate of high-skilled labour?

d. What is the quantity of high-skilled labour employed?

e. Why does the wage rate of a high-skilled worker exceed that of a low-skilled worker by exactly the cost of acquiring the skill?

Wage rate (dollars per hour) 10 Co 60 4 2 0 2 3 4 S D 5 Labour (thousands of hours per day)

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