Suppose a competitive labor market is populated by equal numbers of high-ability (H)and low-ability (L)workers.Each-high ability worker produces output valued at $100 and each low-ability worker produces output valued at $20.In terms of time for their effort,it costs $50 for high-ability students to acquire a college degree while it costs low-ability students $85 to acquire a college degree.Firms will offer workers with college degrees ______ and workers without college degrees ______.
A) $20;$100
B) $150;$85
C) $60;$60
D) $100;$20
E) $50;$20

Question

Quizplus · Accepted Answer

Given the information, firms will offer workers with college degrees $100 (the output value of high-ability workers) because acquiring a college degree signals high ability despite the cost. Workers without college degrees will be offered $20, reflecting the output value of low-ability workers. This scenario assumes that only high-ability workers find it worthwhile to acquire a degree due to the lower cost relative to their output value.

Suppose a Competitive Labor Market Is Populated by Equal Numbers