Econ 147 Final Solutions W!06

# Econ 147 Final Solutions W!06 - NAME: _ STUDENT ID #: _...

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¾ False, the opportunity cost of college is higher for high-ability workers. b. Calculate the net present value (NPV) of attending college and not attending college for both high and low ability workers. Who will go to college? (9 pts.) NPV(nocollege, low) = 28,000 + 28,000/1.025 + 28,000/(1.025) 2 NPV(college, low) = -1700 + 44,000/1.025 + 44,000/(1.025) 2 NPV(nocollege, high) = 42,000 + 42,000/1.025 + 42,000/(1.025) 2 NPV(college, high) = -1200 + 60,000/1.025 + 60,000/(1.025) 2 ¾ Only Low ability workers go to college c. After employers observe the performance of their first employees, will they continue to offer the same wages in the future to workers based on their quiz scores and education levels? Will they want to change who goes to college? Why or why not?
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## This note was uploaded on 04/18/2008 for the course ECON 147 taught by Professor Gordon during the Winter '06 term at UCSD.

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Econ 147 Final Solutions W!06 - NAME: _ STUDENT ID #: _...

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