Question

4. Asymmetric information and labor markets Raphael is the manager of a factory. Workers at the factory are assigned to one of two tasks, one of which requires skilled labor and one of which requires unskilled labor. Because skilled workers earn a higher wage than unskilled workers, everyone who applies for a job says they're skilled. Raphael's challenge is to figure out who is actually a skilled worker and who is an unskilled worker. Suppose that Raphael would like to use the economic concept of screening to separate out worker types, Which of the following scenarios illustrates this concept? Raphael implements a test to determine whether applicants are skilled or not. O Raphael voluntarily pays all workers a higher wage in hopes of attracting and retaining more productive workers. Skilled workers pay to take a certification course to demonstrate their ability. Suppose, instead, the manager considers paying efficiency wages to increase the factory's profitability. True or False: Efficiency wages are higher-than-average wages that are intended to reduce the chances that workers engage in non-productive behavior that might jeopardize their high-paying job. True False

Answer 1

Q4)

(1) The answer is (c). Signalling means that skilled workers will pay to get a certificate which acts as a signal of higher ability. To be effective, the cost of getting the certificate should be higher for the less abled workers as compared to the highly abled workers.

(2) The answer is true. Efficiency wages are wages higher than the equilibrium and thus, the long term average wages that is intentionally done to ensure that productivity is high that further increases profits.