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consoder a hedonic procing model for educational attainment. would isoprofit curves be upward or downward sloping?

consoder a hedonic procing model for educational attainment. would isoprofit curves be upward or downward sloping?


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Solution: In Hedonic pricing model for educational attainment, Isoprofit Curves will be sloping upward. Refer below figure.

Explanation: It is well know truth among industries is worker's productivities depends upon how much education they have received. That is why firms willing to pay more for high educated workers (wages rises as per rise in education level). However, different firms have different hedonic wage equation for education. Firms where productivity is highly depend upon education level of worker will rise more wage of educated worker while firm having less impact on productivity due to educational attainment of worker will rise less wage. But overall wage will rise and slope of isoprofit curve will upward.

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