1. The asymmetry in the labor market is that _______

1. The asymmetry in the labor market is that _______ know more than _______ about a worker€™s _______.
2. Arrows up or down: In a labor market with asymmetric information, a firm will hire only low-productivity workers if the firm€™s _______ is less than the _______ of high-productivity workers.
3. In a labor market with asymmetric information, an increase in the wage _______ (increases/ decreases) the average productivity of the workforce if the wage rises above the _______ of high productivity workers.
4. Paying efficiency wages increases the average productivity of firm€™s workers by discouraging _______ and reducing worker _______.
5. Law firms pay more than hotels for janitors because managers in the law firm have a higher _______.
6. Higher Wages for Landscaping Workers. Suppose that half of landscaping workers have a marginal revenue product of $40 and an opportunity cost of $30 and the other half have a marginal-revenue product of $60 and an opportunity cost of $45. A landscaping firm cannot distinguish between the two types of workers.
a. Suppose a landscaping firm offers a wage equal to $41. What is the average productivity of its workforce? On average, what is the firms profit per worker?
b. Suppose the firm increases its wage to $47. What is the average productivity of its workforce? On average, what is the firms profit per worker?
c. What are the equilibrium wages?
7. Equilibrium with Efficiency Wages. Consider a labor market with asymmetric information: Each worker knows his or her marginal-revenue product, but firms cannot distinguish between low-skill and high-skill workers. Each low-skill worker has an opportunity cost of $80 and a marginal revenue product of $100, and each high-skill worker has an opportunity cost of $130 and a marginal revenue product of $200. The workforce is divided equally between the two types of workers. Fill in the blanks in the followingtable.
1. The asymmetry in the labor market is that _______
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...

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