This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Refer to Figure 4-6. What area represents consumer surplus at the equilibrium price of P1? A) D + ... (Read 138 times)

tth

  • Hero Member
  • *****
  • Posts: 579
on: Jun 29, 2018
Refer to Figure 4-6. What area represents consumer surplus at the equilibrium price of P1?
 
  A) D + E B) A C) A + B + C + D + E D) A + B + C

Question 2

Suppose some workers are capable and others are extraordinary. Firms are willing to pay capable workers a salary of 12,000 and extraordinary workers a salary of 15,000 .
 
  Workers know if they are capable or extraordinary but firms do not (that is, ability is private information). It would cost a capable person 6,000 to earn a college degree but it would cost an extraordinary person just 2,000 to earn a college degree since they can finish their education much faster. Show that in equilibrium in this labor market (i) extraordinary people go to college but capable people do not, and (ii) firms pay college graduates 15,000 and high school graduates 12,000 .


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

zoeyesther

  • Sr. Member
  • ****
  • Posts: 315
Reply #1 on: Jun 29, 2018
Answer to Question 1

D

Answer to Question 2

If an extraordinary person goes to college her salary would be 15,000, she would pay 2,000 for her education, and so she would be left with 15,000  2,000 = 13,000 . Since her salary would be just 12,000 if she did not go to college she is better off if she completes her education. If a capable person goes to college his salary would also be 15,000 but he would pay 6,000 for his education, and so he would be left with 15,000  6,000 = 9,000 . Since his salary would be 12,000 if he did not go to college, he would be worse off if he completes his education. Therefore, given these wages, only extraordinary people go to college. Firms know college graduates are extraordinary and high school graduates are capable and are willing to pay college graduates a salary of 15,000 .
You should see the similarities between this problem and Problem 4 . Some workers and some cars are peaches and some are lemons. A college degree in this problem plays the same role as the certificate in the used car market problem.


tth

  • Member
  • Posts: 579
Reply 2 on: Jun 29, 2018
Gracias!

Viet Thy

  • Member
  • Posts: 329
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

Although the Roman numeral for the number 4 has always been taught to have been "IV," according to historians, the ancient Romans probably used "IIII" most of the time. This is partially backed up by the fact that early grandfather clocks displayed IIII for the number 4 instead of IV. Early clockmakers apparently thought that the IIII balanced out the VIII (used for the number 8) on the clock face and that it just looked better.

Did you know?

The most common childhood diseases include croup, chickenpox, ear infections, flu, pneumonia, ringworm, respiratory syncytial virus, scabies, head lice, and asthma.

Did you know?

GI conditions that will keep you out of the U.S. armed services include ulcers, varices, fistulas, esophagitis, gastritis, congenital abnormalities, inflammatory bowel disease, enteritis, colitis, proctitis, duodenal diverticula, malabsorption syndromes, hepatitis, cirrhosis, cysts, abscesses, pancreatitis, polyps, certain hemorrhoids, splenomegaly, hernias, recent abdominal surgery, GI bypass or stomach stapling, and artificial GI openings.

Did you know?

Signs and symptoms that may signify an eye tumor include general blurred vision, bulging eye(s), double vision, a sensation of a foreign body in the eye(s), iris defects, limited ability to move the eyelid(s), limited ability to move the eye(s), pain or discomfort in or around the eyes or eyelids, red or pink eyes, white or cloud spots on the eye(s), colored spots on the eyelid(s), swelling around the eyes, swollen eyelid(s), and general vision loss.

Did you know?

The FDA recognizes 118 routes of administration.

Two areas of reduced cortical volume and one area of increased cortical volume observed in people ... Two areas of reduced cortical volume and one area of increased cortical volume observed in people ...
Apply gentle circular friction to the temple area. Apply gentle circular friction to the temple area.
From Farm to Consumer From Farm to Consumer
A peice of paper has a perimeter of 100 cm and an area of 616cm^2. Find the dimensions A peice of paper has a perimeter of 100 cm and an area of 616cm^2. Find the dimensions
How much voltage does the resistor drop in Figure 10-2? How much voltage does the resistor drop in Figure 10-2?
Identify the junction nodes in the circuit shown in Figure 21-1. Identify the junction nodes in the circuit shown in Figure 21-1.
Video: Structures that affect circulation - kidneys and blood volume and skeletal muscle pumping

For a complete list of videos, visit our video library