If diplomas work efficiently in signaling productive capabilities to employers,the resulting equilibrium
A) will be a separating equilibrium.
B) will be a pooling equilibrium.
C) will always be inefficient.
D) will never be efficient.

Question

Quizplus · Accepted Answer

If diplomas work efficiently in signaling productive capabilities to employers, then the resulting equilibrium would be a separating equilibrium. This means that individuals with high productive capabilities will obtain diplomas and be hired by high-paying employers, while individuals with lower productive capabilities will not obtain diplomas and be hired by low-paying employers. This separation is efficient because it matches productive capabilities with the appropriate job opportunities, leading to higher productivity and wages for both groups.

If Diplomas Work Efficiently in Signaling Productive Capabilities to Employers,the