Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month.You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity.Kandos, however, have more patience than klutzes.Listening to an hour of dull lectures is as bad losing $200 for a klutz and $150 for a kando.There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month
A)if 15

Question

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month.You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity.Kandos, however, have more patience than klutzes.Listening to an hour of dull lectures is as bad losing $200 for a klutz and $150 for a kando.There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month
A)if 15 < H < 20.
B)if 15 < H < 40.
C)for all positive values of H.
D)only in the limit as H approaches infinity.
E)if 12.50 < H < 16.67.

Quizplus · Accepted Answer

If 15 < H < 20, klutzes will not attend the course because the cost of attending (200H) is greater than the benefit (1,000). Kandos will attend the course because the cost of attending (150H) is less than the benefit (4,000). Therefore, there will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month.

Suppose That in Enigma, Ohio, Klutzes Have a Productivity of $1,000