Suppose there are two types of folks in the world - Slackers and Overachievers. Overachievers are,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose there are two types of folks in the world - Slackers and Overachievers. Overachievers are, by nature, more productive than Slackers. However, employers cannot distinguish between these types of workers based on observable characteristics at the time of hiring. Present discounted value of productivity and costs of college education shown below are shown below for both types. Group Overachiever Slacker Value of Proportion Cost of Marginal Of College Product Population Education $200,000 40% $40,000 $120,000 60% $90,000 a. Suppose that employers believe that those with college education are the ones who are overachievers and those without a college education are the ones who are slackers. Under those set of beliefs, what are the wages paid to college graduates and those without college education? Would overachievers choose to get college education or not? Would slackers choose to get college education or not? Is this a signaling equilibrium? If yes, is it a separating equilibrium or pooling equilibrium? b. What is the highest level of tuition (cost of education) that could be charged to overachievers that would maintain a separating equilibrium? c. Suppose that the cost of college rises dramatically to $100,000 for the overachievers and $140,000 for the slackers. Suppose that employers believe that those with college education are the ones who are overachievers and those without a college education are the ones who are slackers with 60% chance and overachievers with 40% chance. Under those set of beliefs, what are the wages paid to college graduates and those without college education? Would overachievers choose to get college education or not? Would slackers choose to get college education or not? Is this a signaling equilibrium? If yes, is it a separating equilibrium or pooling equilibrium? Suppose there are two types of folks in the world - Slackers and Overachievers. Overachievers are, by nature, more productive than Slackers. However, employers cannot distinguish between these types of workers based on observable characteristics at the time of hiring. Present discounted value of productivity and costs of college education shown below are shown below for both types. Group Overachiever Slacker Value of Proportion Cost of Marginal Of College Product Population Education $200,000 40% $40,000 $120,000 60% $90,000 a. Suppose that employers believe that those with college education are the ones who are overachievers and those without a college education are the ones who are slackers. Under those set of beliefs, what are the wages paid to college graduates and those without college education? Would overachievers choose to get college education or not? Would slackers choose to get college education or not? Is this a signaling equilibrium? If yes, is it a separating equilibrium or pooling equilibrium? b. What is the highest level of tuition (cost of education) that could be charged to overachievers that would maintain a separating equilibrium? c. Suppose that the cost of college rises dramatically to $100,000 for the overachievers and $140,000 for the slackers. Suppose that employers believe that those with college education are the ones who are overachievers and those without a college education are the ones who are slackers with 60% chance and overachievers with 40% chance. Under those set of beliefs, what are the wages paid to college graduates and those without college education? Would overachievers choose to get college education or not? Would slackers choose to get college education or not? Is this a signaling equilibrium? If yes, is it a separating equilibrium or pooling equilibrium?
Expert Answer:
Answer rating: 100% (QA)
aThe wages paid to college graduates and those without college education are 200000 and 120000 respectively The value of marginal productivity for college graduates is 40000 and the cost of college ed... View the full answer
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
Posted Date:
Students also viewed these accounting questions
-
Blossom Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates...
-
The separate condensed balance sheets of Patrick Corporation and its wholly owned subsidiary, Sean Corporation, are as follows: BALANCE SHEETS December 31, 2017 Patrick Sean Cash $ 80,000 $ 56,000...
-
4. (9 pts) For each of the following amino acids provide: a. The full structure under physiological conditions. b. The 3 and 1 letter codes. c. Draw the intermolecular interactions it would...
-
Is an oil pipeline a simplex system, a half-duplex system, a full-duplex system, or none of the above? What about a river or a walkie-talkie-style communication?
-
Why is the common stockholder referred to as a residual claimant?
-
Fortune provides a list of Americas largest corporations based on annual revenue. Shown below are the 50 largest corporations, with annual revenue expressed in billions of dollars (CNN Money website,...
-
Identify and describe the key attributes that might mitigate a red flag, suggesting that no bad act or compliance issues exist.
-
As the manager of credit card services at Bank of Hanover (BOH), you're aware that the average profitability of a credit card customer grows with the number of years they have used the credit card....
-
Briefly explain the differences between a stand alone query language, embedded query language and a data manipulation language.
-
A small rock with mass 0.10 kg is released from rest at point. A, which is at the top edge of a large, hemispherical bowl with radius R=0.60 m (the figure (Figure 1)). Assume that the size of the...
-
Q: How do you decide if Gul Ahmed is earning a profit on Item 007 at Rs.15 a meter? If you are the manager of the department that produces Item 007, would it be to your financial advantage to lower...
-
Could you elucidate various hair conditions along with their respective etiologies employing sophisticated terminology?
-
Find the duration of a bond with settlement date June 14, 2018, and maturity date December 21, 2027. The coupon rate of the bond is 8%, and the bond pays coupons semiannually. The bond is selling at...
-
a) Today a JPMorgan (JPM) trader buys 100 puts (on a stock) for P = $6 each (K=$100, T=1 year and Ap - 0.5). == The initial stock price is S = $100 and the price falls next day to S=$99, with a new...
-
The river is moving at 5 miles per hour. The river is 500 meters wide. A person can swim 15 miles per hour. Calculate the time it takes for the person to swim across to a point on the bank exactly...
-
What are two fundamental physiological roles performed by the nervous system, employing advanced terminology?
-
relative min and max The graph of the following function has one relative maximum point and one relative minimum point. Find these points using the first derivative fest. \[ f(x)=-x^{3}-12 x^{2}-36...
-
The Higher the time period of the financial security the higher the. ............... risk. O a. Maturity O b. Default and Maturity Oc. Default O d. Liquidity
-
Determining cash receipts from accounts receivable Janices Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $560,000 in December....
-
Pam Kelly says she has no faith in budgets. Her company, Kelly Manufacturing Corporation, spent thousands of dollars to install a sophisticated budget system. One year later the companys expenses are...
-
Lucas Weldon, the president of Easeley Industries, Inc., was beaming when he was reviewing the companys quality cost report. After he had implemented a quality-control program for three years, the...
-
As the Internet continues to grow in its business influence, it is increasingly being used for applications that were formerly client/server based applications. What are some of the similarities in...
-
Fill in the blanks for the following statements: a. Source documents should be portioned into different zones for data, data, and depending upon the system inputs and reviewing form, for data that...
-
Why does the free-rider problem occur in the debt market?
Study smarter with the SolutionInn App