! Assume thatyouhave been admitted to two different university educations(A and B). Education A is very advanced and demands a high effort fromyour side in order to get through it. However, if you do graduate you willget (with certainty) a very good job (interesting, stimulating and witha high salary); if you do not graduate from education A, you will haveto settle with an uninteresting job with a low salary. Education B isrelatively simple and everyone graduates who gets admitted and they get"satsifactory" jobs (pretty fun and with a medium salary). Assume thatyour life-time income with the best job (if you graduate from educationA) is YA = $2, 000, 000, the life-time income from the bad job you have tosettle for if you fail to graduate from education A is Ythe life-time income you get from the pretty good job you get if you chooseeducation B is YB = $1, 200, 000. Assume thatto graduate from education A to 50% and that your utility function forlife-time income is: U(Y) = ln Y.$500, 000, andyouestimateyour chances(a) Which education gives the highest expected life-time income?(b) Which education will you choose if you strive to maximize your ex-pected utility? Explain.(c) What level of life-time income that you get from education B, wouldmake you indifferent between A and B? What is the minimum wage-premium that you demand in order to choose education A in frontof B?(d) Assume that there are many students in your situation, i.e., theywant to start education A, but worry that they may fail. Assume

Education is a process through which people learn to think, behave and feel in a way that helps…

(a) Which education gives the highest expected life-time income? (b) Which education will you choose if you strive to maximize your ex- pected utility? Explain. (c) What level of life-time income that you get from education B, would make you indifferent between A and B? What is the minimum wage- premium that you demand in order to choose education A in front of B? (d) Assume that there are many students in your situation, i.e., they want to start education A, but worry that they may fail. Assume

(a) Which education gives the highest expected life-time income? (b) Which education will you choose if you strive to maximize your ex- pected utility? Explain. (c) What level of life-time income that you get from education B, would make you indifferent between A and B? What is the minimum wage- premium that you demand in order to choose education A in front of B? (d) Assume that there are many students in your situation, i.e., they want to start education A, but worry that they may fail. Assume

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: Earnings And Discrimination

Section: Chapter Questions

Problem 5PA

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fmagine that somecne offered you a choice, You couldspend four years studying at the world 's best uni•versity, but you would have to keep your attendancethere a secret Or you could be awarded an official degree from the world's best university, but you couldn'.tactually attend. Which choice do you think wouldenhance your future earnings more? What does youranswer say about the debate over signaling versus human capital in the role of education?
Suppose Carl’s wage-schooling locus is given byYears of Schooling Earnings 9 $18,500 10 $20,350 11 $22,000 12 $23,100 13 $23,900 14 $24,000Derive the marginal rate of return schedule. When will Carl quit school if his discount rate is 4 percent? What if the discount rate is 12 percent?
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Suppose Fred's wage-schooling relationship is given by Years of Schooling Earnings 9 $28,000 10 $31,150 11 $33,700 12 $35,900 13 $37,400 14 $38,500 Derive the marginal rate of return schedule. When will Fred quit school if his discount rate is 5 percent? What if the discount rate is 10 percent?
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3. In the upcoming year, the income from your current job will be $50,000. There is a 0.5 chance that you will keep your job and earn this income, and 0.2 chance that you will get a rise and earn 75,000. However, there is 0.3 chance that you will be laid off, putting you out of work for a time and forcing you to accept a lower paying job. In this case, your income is $25.000. The expected value of your income is thus $47,500. a) If your utility function has the formula 5001 - 0.0002f, determine the risk premium associated with this lottery. b) Provide an interpretation of the risk premium in this particular example.
Currentlyyouworkfor40hoursperweekatthewagerateof$20anhour.Your free hours are defined as the number of hours not spent in work per week, which in this case is 24 hours × 7 days − 40 hours = 128 hours per week. Suppose now that your wage rate has increased by 25%. If you are happy to keep your total weekly income constant, how many hours will you work? How many free hours will you have?
Jill is planning the timing of her on-the-job training investments over the life cycle. What happens to Jill’s OJT investments at every age if a. The market-determined rental rate to an efficiency unit falls? b. Jill’s discount rate increases? c. The government passes legislation delaying the retirement age until age 70? d. Technological progress is such that much of the OJT acquired at any given age becomes obsolete within the next 10 years?
Otherthingsbeingconstant,howwillthefollowinginfluence the hourly earnings of employees? Explain your answer. The employee must work the midnight to 8:00 a.m. shift. The job involves split shifts (work three hours, off two hours, work three additional hours, and so on). Theemployerprovideslow-costchildcareservicesonthe premises. The job is widely viewed as prestigious. The job requires employees to move often from city to city. The job requires substantial amounts of out-of-town travel.