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Calculate Mandy's present value of lifetime earnings. 2. Suppose Mandy's eamings are given by w(S,A)=/SA+1, where S denotes years of schooling and A denotes ability.

Calculate Mandy's present value of lifetime earnings.

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2. Suppose Mandy's eamings are given by w(S,A)=/SA+1, where S denotes years of schooling and A denotes ability. Assume that Mandy lives forever, discounts future income at a rate of r, earns nothing while in school, and supplies labor inelastically thereafter. Assume that A is exogenous and time is continuous, Mandy's objective is to choose S to maximize the present value of lifetime earnings. (a) Calculate Mandy's present value of lifetime earnings. (b) Find Mandy's optimal choice of years of schooling 8' . (c) Find the partial derivatives of S' with respect to A. Is the relationship between S i and A intuitively reasonable? Explain

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