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|.2 a) b) After graduating from PonU and working full time for three years, Peter decided topursue further study for a postgraduate degree. He has...

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|.2 After graduating from PolyU and working full time for three years, Peter decided topursue
further study for a postgraduate degree. He has received the offers from three
postgraduate programmes with details as follows: (1) Part-time programme A: The tuition fee is $0.3 million and Peter will receive a benefit
of $0.9 million from the programme. He can keep his job and work full time when
studying for this programme. (2) Full-time programme B: The tuition fee is $0.4 million and Peter will receive a benefit
of $1 .5 million from the programme. However, he has to forgo the income of $0.6 million
when studying for this programme. In addition, the programme gives Peter a
scholarship that equals 50% of the tuition fee. (3) Full-time programme C: The tuition fee is $0.3 million and Peter will receive a benefit
of $1 .5 million from the programme. However, he has to forgo the income of $0.6 million
when studying for this programme. In addition, the programme gives Peter a
scholarship that equals 40% of the tuition fee. For simplicity, assume there are no additional benefits and costs other than those
mentioned above. Calculate the economic surplus received from each programme. Which is the first-best
programme for Peter based on your calculation? What is the minimum scholarship (in dollar term) offered by programme A such that Peter
finds it indifferent between programme A and his first-best programme that you answer in
part (a) above? Please show your calculation. After Peter has paid a non-refundable deposit of $0.1 million to the first-best programme
that you answered in part (a) above, he receives the notification from programme A that
the programme will give him a scholarship of $0.2 million. Explain whether Peter should
shift to study for programme A.

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