4. Asymmetric information and labor markets Crystal is the manager of a factory.

Question

4. Asymmetric information and labor markets Crystal 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. Crystal's challenge is to figure out who is actually a skilled worker and who is an unskilled worker. Suppose that Crystal would like to use the economic concept of screening to separate out worker types. Which of the following scenarios illustrates this concept:? Crystal 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. Crystal implements a test to determine whether applicants are skilled or not. 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 attract better-qualified workers. True False

Explanation / Answer

A. In this case, crystal should implement a test to determine whether applicants are skilled or not , it is not necessary higher wages gives higher profitabilit  because this is not happening Many jobs in industries that generate high profits (retail trade, educational services, mining, and forestry) tend to pay low wages and are therefore unattractive to workers, whereas jobs in industries that pay higher wages (finance, computer and electronics manufacturing, paper & printing) are not very profitablethe adjustments that workers and firms make will only eliminate the gap if wages reflect the relative supply and demand for various skills across occupations.                                                                                                                            B. TRUE: Efficiency wages are higher than average wages because efficiciency wages attract more higher skilled and qualifed workers it encourage higher output and to raise worker morale, and to discourage absenteeism and inventory shrinkage.                                                                                                                                                              

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