LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Chapter 6, Problem 8P
To determine
The range in which ‘K’ makes education as an effective screening device.
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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?
There are 15 barbershops in a specific geographic region that all compete for clients and employees. Most of these businesses periodically conduct salary surveys. Most businesses want to be market leaders on pay, thinking that they can attract and retain staff if they pay more than the competitor. What is the likely impact on rates of pay for local barbers in the region?
Discriminatory practices may dominate the industry.
Stereotyping will occur.
Pay rates will decrease over time.
Pay rates will increase over time.
Children in poor neighborhoods have bleak outlooks on life and do not see much gain to studying. A recent experiment is paying children in poor neighborhoods $100 for each “A” they earn in a six-week grade reporting cycle. How does this affect the children’s behavior?
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