QUESTION 10 There are two major theories of why education leads to higher earnin

Question

QUESTION 10 There are two major theories of why education leads to higher earnings (though they are not mutually exclusive): signaling and the building of labor market O A. It would decrease because most of what you learn in college does not make you more productive d a college o B. It would increase because more people would be identified as hard working. O C. It would decrease because it would be more difficult to differentiate workers. O D. It would increase because the marginal product of labor would increase.

Explanation / Answer

Signalling will help the employer to identify hard worker from lazy worker or to differentiate between skilled worker and unskilled worker. Because signalling theory is dominant the average wage is expected to increase for a college graduate when everyone has a college degree. This is perhaps because now everyone has a college degree, all the workers are now considered to be equally skilled and hence the productivity is expected to increase.

Correct option is option d.

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