In Ann Arbor, there are two types of workers. Each Low Productivity worker has a constant marginal product worth $10 and each High Productivity worker has a constant marginal product worth $25 per hour. Both work 100 hours per month. A lecture series on art is being offered at the university. These lectures have no effect on productivity, and each hour of lecture is just as bad as a $100 per month wage cut for a High Productivity worker and as bad as a $300 per month wage cut for a Low Productivity worker. In a separating equilibrium, those who attend at least h hours of lecture will receive a wage of $25 per hour worked and those who do not will receive a wage of $10 per hour worked. For which value of h will there be a separating equilibrium?
a. 2
b. 10
c. 16
d. 20
e. 4
Answers: 3
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