Question: A rm is looking to hire a worker with complete college education. There are two types of such workers: high-productivity, with marginal productivity of 10,

education. There are two types of such workers: high-productivity, with marginal productivity

A rm is looking to hire a worker with complete college education. There are two types of such workers: high-productivity, with marginal productivity of 10, and lowproductivity, with marginal productivity of zero. Out of all students completing college, a fraction ph has high productivity, and the rest (p; = 1 ph) have low productivity. The rm is riskneutral. That is, it only cares about expected prots associated from hiring a worker: the difference between the expected productivity and the wage. 6. Now assume that the firm cannot observe the worker's type. What is the probability that a random job applicant will be a low-productivity worker? Assuming the firm is risk-neutral, what is the highest wage it would be willing to pay for college-educated workers? (a) Probability: Ph, Highest wage: 10ph (b) Probability: Ph, Highest wage: 10(1 - Ph) (c) Probability: 1 -Ph, Highest wage: 10(1 -Ph) (d) Probability: 1 -ph, Highest wage: 10ph (e) Probability: 1 -Ph, Highest wage: 0

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