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QUESTION

# 55% of the population are low-productivity workers and 45% of the population are high-productivity workers.

55% of the population are low-productivity workers and 45% of the population are high-productivity workers.The present value of life time productivity forlow-productivity workers is \$175,000 and the present value of life time productivity for high-productivity workers is \$225,000. School would cost \$15,000 for the high-productivity workers and \$25,000 for the low-productivity workers.

a) An employer could simply pay all types the same amount .How much would an employer pay?

b) High-productivity workers would like to signal to employers that they are high-productivity. In order to be a true signal, there are two requirements. What are they?

c) Calculate a range of how many years of school an employer would require.

d) Briey explain the difference between a separating and a pooling equilibrium.