$1.$ Paula is considering going to law school. If she does, she will spend $$60,000$ on tuition

and books to get a college education $($during the first time period$),$ $$120,000$ on tuition

and books to get a law degree $($during the second time period$),$ and her law degree will

earn her $$620,000$ during the remainder of her work$-$life $($during the third time period$).$

Paula's time preference for money is associated with a per$-$period discount rate of $20$

percent. Approximately what is Paula's present value of obtaining a law degree?

a$.$ $$100,100$

b$.$ $$210,400$

c$.$ $$270,500$

d$.$ $$440,000$

e$.$ $$621,900$

$2.$ As the interest rate increases,

a$.$ the present value of future benefits increases

b$.$ the discount rate decreases

c$.$ the future return to an investment decreases

d$.$ the present value of future benefits decreases

e$.$ the present value of lifetime earnings increases

$3.$ The wage$-$schooling locus is

a$.$ downward sloping because education is generally productive.

b$.$ upward sloping because education is generally productive.

c$.$ backward bending.

d$.$ horizontal because wages are unrelated to schooling.

e$.$ vertical because education is a public good.

$4.$ If ability is positively related to schooling, then estimating the returns to education

directly from the wage$-$schooling profile will likely

a$.$ underestimate the average wage

b$.$ overestimate the average wage

c$.$ underestimate the return to schooling

d$.$ overestimate the return to schooling

e$.$ underestimate the average discount rate

$5.$ Suppose $40$ percent of all potential workers are highly skilled and contribute $$50,000$ to

the firm each year. The remaining $60$ percent of potential workers are less skilled and

contribute only $$30,000$ to the firm each year. When schooling is not used as a signaling

device, how much is the firm willing to pay a worker in a pooling equilibrium?

a$.$ $$30,000$

b$.$ $$34,000$

c$.$ $$38,000$

d$.$ $$42,000$

e$.$ $$50,000$

$6.$ True or False: Education can have a signaling value if it is costlier to obtain for highability individuals than low$-$ability individuals.

a$.$ True

b$.$ False