Microeconomics, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134461786
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 16, Problem 5P
(i)
To determine
Reason why extraordinary people will choose to go to college while capable people do not.
(ii)
To determine
Reason for paying high school graduates
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Question 1
Imagine we live in a world with two types of skill sets: people with high ability and people with low ability. A diploma will cost a high ability person about 8K and will cost a low ability person about 20K. Businesses use education as a screening tool and they intend to pay 25k to workers without a diploma and $X to those with a diploma. In what range must X be to make this an effective screening tool?
Your answer will include a set of equations showing the dollar range for both low ability and high ability people.
Suppose there are two types of persons: high-ability and low-ability. A particular diploma costs a high-ability person $8,000 and costs a low-ability person $20,000. Firms wish to use education as a screening device where they intend to pay $25,000 to workers without a diploma and $ K to those with a diploma. In what range must K be to make this an effective screening device?
True or false
1. A perceived disadvantage of Rawls's social justice theory is that it does
not consider the fact that people would not want to maximize benefits for
the least advantaged persons
2. Ethical relativism is a moral theory which holds that individuals must
decide what is ethical based on their own feelings about what is right and
wrong.
3. Utilitarianism is a moral theory that chooses the greatest good to
society but does not mean the greatest good for the greatest number of
people.
4. According to Rawls's “social justice” theory, a person who is in a state of
"veil of ignorance" is best fit to select the fairest possible ethical principles.
Please help, & thank you!
Chapter 16 Solutions
Microeconomics, Student Value Edition (2nd Edition)
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