Assume that, in this market for used cars: buyers and sellers are risk-neutral; a proportion of...

 

 

 

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Assume that, in this market for used cars: buyers and sellers are risk-neutral; a proportion of the cars is of bad quality (the rest is of good quality); buyers value a bad-quality car (lemon) at $10 and a good-quality car (peach) at $20, and the reservation price of sellers is $8 for lemons and $18 for peaches. Which of the following alternatives is correct? Group of answer choices. For any 0 < 20%, buyers pay p = 20 - 100, and all cars sell For any , < 20%, buyers pay pb = 8, and all only lemons sell For any 8, < 80%, buyers pay pg = 18, and all only peaches sell For any 8 < 80%, buyers pay p = 20 - 100, and all cars sell Assume there are two types of workers, low- and high-ability, and let = 0.50 be the proportion of high-ability workers in the population. The workers' marginal productivity and, therefore, their wages are wh = $30 and w = $20, and both types can use college education to signal high ability. The cost of college education for high-ability workers is c = $4, and the cost for low-ability workers is c = $12. What is the average wage, w, that risk-neutral firms pay to each worker type when they cannot differentiate between them? = $17 Ow=$20 Ow=$25 =$30 Consider the same information as in Question 2. Assume the government gives a subsidy of s dollars to anyone attending college, thus reducing the cost of using college education to signal ability to ch' = $4-s for the high-ability workers and c = $12-s for the low-ability workers. Which of the following alternatives is correct? Group of answer choices If s=$1, firms can't use education as a signal of ability to differentiate between workers If s = $3, all workers want to go to college because ch Assume that, in this market for used cars: buyers and sellers are risk-neutral; a proportion of the cars is of bad quality (the rest is of good quality); buyers value a bad-quality car (lemon) at $10 and a good-quality car (peach) at $20, and the reservation price of sellers is $8 for lemons and $18 for peaches. Which of the following alternatives is correct? Group of answer choices. For any 0 < 20%, buyers pay p = 20 - 100, and all cars sell For any , < 20%, buyers pay pb = 8, and all only lemons sell For any 8, < 80%, buyers pay pg = 18, and all only peaches sell For any 8 < 80%, buyers pay p = 20 - 100, and all cars sell Assume there are two types of workers, low- and high-ability, and let = 0.50 be the proportion of high-ability workers in the population. The workers' marginal productivity and, therefore, their wages are wh = $30 and w = $20, and both types can use college education to signal high ability. The cost of college education for high-ability workers is c = $4, and the cost for low-ability workers is c = $12. What is the average wage, w, that risk-neutral firms pay to each worker type when they cannot differentiate between them? = $17 Ow=$20 Ow=$25 =$30 Consider the same information as in Question 2. Assume the government gives a subsidy of s dollars to anyone attending college, thus reducing the cost of using college education to signal ability to ch' = $4-s for the high-ability workers and c = $12-s for the low-ability workers. Which of the following alternatives is correct? Group of answer choices If s=$1, firms can't use education as a signal of ability to differentiate between workers If s = $3, all workers want to go to college because ch

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