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Unformatted text preview: NAME: ___________________________ STUDENT ID #: ____________________ Economics 147: The Economics of Education Professor Nora Gordon Winter 2006 UC San Diego MIDTERM EXAMINATION SOLUTIONS See regrade policy under exam information on WebCT before requesting regrades. There are a total of 50 points on this examination. I suggest you allocate one minute per point should be sufficient, but you may use the full 80 minutes allotted. You may use calculators; you may not use notes, readings, or any other outside materials. Only exams written in ink will be considered for regrades. Please read the questions carefully and answer completely. For quantitative problems, show all your work and do not use any scrap paper. Your short-answer responses should be specific and concise. Points will be deducted for extraneous incorrect information. Good luck. 1. True/false/uncertain, explain : credit depends fully on explanation. Children who enter kindergarten knowing the alphabet have higher ability than children who enter kindergarten without knowing the alphabet. Use the specific definition of ability we have used in the course in your answer. (3 pts.) Ability in this class refers specifically to skills that are innate. You are born with them, and they cannot be changed. Human capital refers to skills that are learned through some process, which can include things other than formal schooling, like playing with letter blocks at home. No one is born knowing the alphabet. If two children have the same ability and one of them has more opportunities to learn the alphabet before kindergarten and does so, while the other does not, that child will have greater human capital but the same ability as the child who does not know the alphabet upon entering kindergarten. Alternately, two children who both do or do not know the alphabet may have different ability levels, despite their common knowledge (or lack thereof) of the alphabet. Whether or not children know the alphabet before kindergarten is therefore insufficient information upon which to compare their ability levels. 2. True/false/uncertain, explain : credit depends fully on explanation. Government should intervene in the provision of elementary education because of credit market failures. Be specific about what you think the credit market failure is. (3 pts.) As discussed in the reading by Lori Taylor, because returns to investments in human capital are embodied in actual human beings (as opposed to, say, a house or car), borrowers may lack sufficient collateral and lenders will charge rates for education loans than for loans for other purposes. These high rates may result in suboptimal investment in human capital. This problem is exacerbated by the fact that parents may not wish to borrow for or invest in their childrens education. It is important that the government correct for credit market failures in education because of the positive externalities to society generated by education. 3. When Eric Hanushek refers to finding a total teacher effect, what does he mean and...
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