Suppose 40 Percent of All Potential Workers Are Highly Skilled

Suppose 40 percent of all potential workers are highly skilled and contribute $50,000 to the firm each year. The remaining 60 percent of potential workers are less-skilled and contribute only $30,000 to the firm each year. Schooling costs a highly skilled worker y per year, while it costs a less-skilled worker 2y per year. What range of y will support a signaling equilibrium?

A) $0 < y < $50,000
B) $5,000 < y < $10,000
C) $5,000 < y < $20,000
D) $10,000 < y < $20,000
E) $20,000 < y < $50,000

Correct Answer:

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