Author Question: In a labor-market pooling equilibrium with high-skill and low-skill workers and where a costly ... (Read 71 times)

asmith134 · **on:** Jul 1, 2018

In a labor-market pooling equilibrium with high-skill and low-skill workers and where a costly educational degree is used as a signaling device, all else equal, an increase in the wage differential between high- and low-skill workers leads to

A) an increase in the required minimum share of high-skill workers.
B) a decrease in the required minimum share of high-skill workers.
C) no change in the required minimum share of high-skill workers.
D) None of the above answers are correct.

Question 2

In a labor-market separating equilibrium with high-skill and low-skill workers and where a costly educational degree is used solely as a signal device, government can increase total social welfare by

A) subsidizing school for low-skill workers.
B) subsidizing school for all workers.
C) eliminating schooling, i.e., banning wasteful signaling.
D) subsidizing school for high-skill workers.

jjorrostieta · **Reply #1 on:** Jul 1, 2018

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