Research shows that after-school jobs are highly correlated with decreases in grade point averages. Those who work 1 to 10 hours get a 3.0 GPA and those who work 21 hours or more have a 2.7 GPA. Higher GPAs are, however, highly correlated with higher lifetime earnings. Assume that a person earns $8,000 per year for working part-time in college, and that the return to a 0.1 increase in GPA gives one a 10 percent increase in one’s lifetime earnings with a present value of $80,000.

a. What would be the argument for working rather than studying harder?

b. Is the assumption that there is a trade-off between working and grades reasonable?