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6. Suppose that education does not increase an individuals marginal productivity and that there are of people in the world:workers. Firm 2 offers to pay workers such that the present discounted value of their lifetime earnings is $12 if workers hav

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a. a) Given cost: Over activery o.se Slackern : e firm-I : Overachiners O yeary d education a 8-0 = $8 6 year n n = 1- (0.5x6) =

b. The minimum educational standard that a organization can give and still expect to be able to distinguish between over attainers and slackers will be up to the year in which the gap between the marginal productivity of the slackers receiving education or not will be the same.

If a company offers fewer years of education, instead, slackers will choose to receive education and the organization will not be able to distinguish between slackers and over-achievers.

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