b Suppose musical conservatories raise their tuition so that it now costs

B suppose musical conservatories raise their tuition

This preview shows page 5 - 6 out of 6 pages.

(b) Suppose musical conservatories raise their tuition so that it now costs Debbie $60,000 to become aconcert pianist. What career will Debbie pursue if the interest rate is 5 percent? 6-4. Suppose the skills acquired in school depreciate over time, perhaps because technological change makes the things learned in school obsolete. What happens to a worker’s optimal amount of schoolingif the rate of depreciation increases? 6-6. Suppose Carl’s wage-schooling locus is given byYears of SchoolingEarnings9$18,50010$20,35011$22,00012$23,10013$23,90014$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?
Schooling Earnings MRR 9 $18,500 10 $20,350 10.0 11 $22,000 8.1 12 $23,100 5.0 13 $23,900 3.5 14 $24,000 0.4 Carl will quit school when the marginal rate of return to schooling falls below his discount rate. If his discount rate is 4 percent, therefore, he will quit after 12 years of schooling; if his discount rate is 12 percent, he will quit after 9 years of schooling.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture