Explain what market signaling is? What will be an ideal ...

[BRWH]

Explain what market signaling is?
 
  What will be an ideal response?

Question 2

Maimonides, a twelfth century scholar, said, Twenty-five children may be put in the charge of one teacher. If the number in the class exceeds twenty-five but is not more than forty, he should have an assistant to help with the instruction.
 
  If there are more than forty, two teachers must be appointed. Israel follows Maimonides's rule in determining the number of teachers for each school. How could you use Maimonides's rule to study the effect of teacher-student ratios on student achievement?

[bulacsom]

Answer to Question 1

These are actions taken by buyers and sellers to communicate quality in a world of uncertainty.

Answer to Question 2

Maimonides's rule generates a natural experiment to study of the effect of class size. Suppose School A has 40 third-graders and School B has 41 . Following Maimonides's rule, School A would have one 40-student class while School B would have one 20-student class and one 21-student class. Everything else equal, if smaller classes improve achievement then we should expect to see higher test scores in School B.
See Joshua D. Angrist and Victor Lavy Using Maimonides' Rule to Estimate the Effect of Class Size on Scholastic Achievement, Quarterly Journal of Economics, 1999 (http://qje.oxfordjournals.org/content/114/2/533.full.pdf+html).

[BRWH]

Gracias!

[gcook]

Excellent