Question
A) Sometimes, when a worker gets more education, it allows her or him to help coworkers increase their productivity on the job. This is an
A) Sometimes, when a worker gets more education, it allows her or him to help coworkers increase their productivity on the job. This is an example of an externality. Describe conditions under which the presence of this kind of externality increases the socially efficient level of education subsidies. Describe conditions under which presence of this kind of externality does not increase the socially efficient level of education subsidies. Explain.
B) Why is the current structure of benefits and funding for U.S. Social Security expected to be unsustainable without a change in the Social Security law? Give a complete set of reasons as you can.
C) Suppose that the only change in the law is a single fixed percentage change in the benefits paid. Every recipient would receive a fixed percentage of the benefit they would receive under current law. Estimate that percentage under the assumption that it will be as close to 100% as possible. Explain how you get your estimate, explaining the main factors that the percentage depends on.
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