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6. a. [10 Points]. Answer the following questions. Suppose Sara is 18 years old and she has a high school diploma. With that degree, she
6. a. [10 Points]. Answer the following questions. Suppose Sara is 18 years old and she has a high school diploma. With that degree, she can make $10/hour. Also, suppose that the opportunity cost of her high school diploma is r, depreciation of her health capital due to that education is do, and H is her health capital stock on the last day of her high school diploma. Depict Sara's optimal stock of health capital in a leveled diagram. b. Suppose that she invests in a college education, expecting to get a better and higher- wage job. Show how her optimal stock of health capital changes by the age of 30 due to the increased wage. Then, show how her education would affect her optimal health stock if education also made her a more efficient producer of health. d. Suppose that after age 30 her wage stays the same. As she ages, show what happens to her optimal stock of health capital, assuming that the depreciation rate of health increases with age. C. 6. a. [10 Points]. Answer the following questions. Suppose Sara is 18 years old and she has a high school diploma. With that degree, she can make $10/hour. Also, suppose that the opportunity cost of her high school diploma is r, depreciation of her health capital due to that education is do, and H is her health capital stock on the last day of her high school diploma. Depict Sara's optimal stock of health capital in a leveled diagram. b. Suppose that she invests in a college education, expecting to get a better and higher- wage job. Show how her optimal stock of health capital changes by the age of 30 due to the increased wage. Then, show how her education would affect her optimal health stock if education also made her a more efficient producer of health. d. Suppose that after age 30 her wage stays the same. As she ages, show what happens to her optimal stock of health capital, assuming that the depreciation rate of health increases with age. C
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