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(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?
SchoolingEarningsMRR9$18,50010$20,35010.011$22,0008.112$23,1005.013$23,9003.514$24,0000.4Carl 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.