Letter from an “Anti-School Teacher”

Assume schools can either set the average grade to B or C. Schools that set the average grade to C have higher standards so students from those schools graduate college at a higher rate. Assume also that college admissions officers do not have perfect information about the standards of each high school so they admit students from schools where a B is the the average grade more often than students from schools where a C is the average grade. 45 percent of students from low standards schools graduate college while 55 percent of students from high standards schools graduate.

Source: www.econlib.org