Question
Oliver has determined his wage schooling locus below: Years of Schooling Annual Earnings 8 $10,000 9 $12,800 10 $16,000 11 $18,500 12 $20,350 13 $22,000
Oliver has determined his wage schooling locus below:
| Years of Schooling | Annual Earnings |
| 8 | $10,000 |
| 9 | $12,800 |
| 10 | $16,000 |
| 11 | $18,500 |
| 12 | $20,350 |
| 13 | $22,000 |
| 14 | $23,100 |
| 15 | $23,900 |
| 16 | $24,000 |
Oliver has received a full-ride scholarship, so we assume there is no schooling cost (only the oppor-tunity cost of not working). Finally, lets assume his life is infinitely long.
(a) What is Olivers marginal rate of return schedule?
(b) Lets assume Oliver determined his discount rate is 4%. If that is true, when will he choose toquit school?
(c) Now, lets assume a new tax rate has been implemented on income (20%). If that is true, whenwill he choose to quit school now?
(d) Why is it hard to truly estimate returns to schooling in this case?
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0073379616, 73379611, 978-0697789938
