3. When you arrive at UConn as a freshman, you must decide about whether to take an on-campus job and if so, which one. You have narrowed it down to two possibilities: working for Professor Furtado as a research assistant or serving coffee at one of the campus cafes. Both jobs involve the same weekly hours of work. The coffee job pays $7,000 per year for each of the years. As a research assistant, you would be using a popular statistical program to analyze data. This program is used by many other UConn professors for their research. Professor Furtado pays her research assistants $1,000 for the first year that they work for her and then $10,000 every year after that. Her reasoning for offering the lower salary in the first year is that when students are just learning the statistical program, they are not very productive. She must spend a lot of time training them and answering questions.

Thus, if you choose to work as a research assistant, you can act as though you will make just $1,000 in the first year, but for your sophomore, junior, and senior years, you will be making the full $10,000. If instead, you choose to serve coffee, you will make $7,000 per year for all four years. (9 points)

a. Professor Furtado knows that students can really use the cash when they first arrive at UConn, why doesnt she offer them $7,500 each year. This would save her money in the end (7,500 x 4=$30,000 which is less than $31,000 she currently pays her RAs that work for her all four years)? Explain using the concepts of general vs. firm-specific training.

b. In the graph below, draw the years-wage profiles for working at the cafes and working for Professor Furtado. Assume you will only be at UConn for four years. Label your costs and benefits using the two profiles. (3 points)

c. If the interest rate is zero and you only care about maximizing your income while at UConn, which job should you take? Circle one: Coffee shop/Research Assistant

d. Now assume that the interest rate is 0.10. For simplicity, you can assume that you get paid in one lump sum at the beginning of each year. Write down the formula you use and show your calculations.

i. What is the present discounted value of the coffee shop job?

ii. What is the present discounted value of the research assistant job?

iii. Which job should you take if the interest rate is 0.10?

e. Next assume that you are planning on studying abroad during your junior year (year 3 at UConn). Show on the graph above how this will affect your decision-making process? This change will circle one>: increase/decreaseot affect your likelihood of taking the research assistant position. Explain using your graph.

f. Lets say that females in general are more likely than males to study abroad in their junior year. Assuming that Professor Furtado hires all qualified applicants and does not discriminate, will she end up hiring more males or females? Explain.

Yearly Salary (S) Years at UConn