The Value of a Worker's Marginal Product Is $40 Per

Multiple Choice

The value of a worker's marginal product is $40 per hour for high-ability workers and $5 per hour for low-ability workers.The preferences of high-ability workers correspond to the utility function U_H(E,W) = W - 5E,and the preferences of low-ability workers correspond to the utility function U_L(E,W) = W - 8E.By law,everyone is required to attend at least ten years of school.Three-fourths of the population has low ability,and one-fourth has high ability.What is the most efficient separating equilibrium?

A) E_L = 10; E_H = 14.375
B) E_L = 10; E_H = 17
C) E_L = 10; E_H = 10
D) E_L = 14.375; E_H = 14.375