Q2 a (5 points) Imagine there are two types of individuals, high types and low types. There is a degree that costs the high type $7500 to complete while costing the low type $16,000 to complete. Suppose a firm wants to use this degree to screen job applicants. They will pay those without the degree $25000, and those with the degree $"S". What must "S" be in order for this degree to separate high and low types? Explain your findings. What would happen if this didn't hold? Draw a diagram of your findings. + Drag and drop an image or PDF file or click to browse... Q2 b (5 points) Tully is a graduating high school senior deciding between three alternative combinations of education-work options. He could start working immediately and earn $30,000 working in a burrito truck in period one. His salary would increase to $60,000 in period 2 as he would become chef, and then fall in period 3 to $50,000 as he would become too physically tired to work too much in the kitchen. His first alternative is to spend $15,000 to attend Da-Lousy University for economics and earn an undergrad degree in period 1. Upon obtaining his degree he would earn $80,000 as an economist for periods 2 and 3. The final option is for Tully to complete a doctorate degree in economics after finishing his undergrad degree. Getting a PhD in period 2 would only cost $1000 in direct costs due to scholarships, but he could not work in period 2 while he completed his PhD. After finishing his PhD he would earn $180,000 as an Econ Prof at Kings University in period 3. His discount rate is 20 percent per period. What should Tully choose to do? How does the discount rate influence his decision? + Drag and drop an image or PDF file or Click to browse... Q2 c (3 points) We've learned two theories of education: human capital and signaling. Economists have estimated fairly large "sheepskin" effects, where wages increase significantly when someone earns a degree. Do you think these Q2 c (3 points) We've learned two theories of education: human capital and signaling. Economists have estimated fairly large "sheepskin" effects, where wages increase significantly when someone earns a degree. Do you think these sheepskin effects are consistent with the human capital theory of education or signaling? Carefully explain. Do you think these theories could both hold some merit in the real world? Carefully explain. + Drag and drop an image or PDF file or click to browse... Q3 a (5 points) The minimum wage in Ontario has increased from $11.70 an hour in 2017 to $14.25 an hour. Some have claimed that this has increased unemployment in Ontario. Could you just look at the unemployment rate in 2017 and compare it to the present? Why or why not? How would you try and test their claim? If you found that minimum wage had no impact on the unemployment rate, does that mean there was no effect of minimum wage on the labour market? + Drag and drop an image or PDF file or click to browse... Q2 a (5 points) Imagine there are two types of individuals, high types and low types. There is a degree that costs the high type $7500 to complete while costing the low type $16,000 to complete. Suppose a firm wants to use this degree to screen job applicants. They will pay those without the degree $25000, and those with the degree $"S". What must "S" be in order for this degree to separate high and low types? Explain your findings. What would happen if this didn't hold? Draw a diagram of your findings. + Drag and drop an image or PDF file or click to browse... Q2 b (5 points) Tully is a graduating high school senior deciding between three alternative combinations of education-work options. He could start working immediately and earn $30,000 working in a burrito truck in period one. His salary would increase to $60,000 in period 2 as he would become chef, and then fall in period 3 to $50,000 as he would become too physically tired to work too much in the kitchen. His first alternative is to spend $15,000 to attend Da-Lousy University for economics and earn an undergrad degree in period 1. Upon obtaining his degree he would earn $80,000 as an economist for periods 2 and 3. The final option is for Tully to complete a doctorate degree in economics after finishing his undergrad degree. Getting a PhD in period 2 would only cost $1000 in direct costs due to scholarships, but he could not work in period 2 while he completed his PhD. After finishing his PhD he would earn $180,000 as an Econ Prof at Kings University in period 3. His discount rate is 20 percent per period. What should Tully choose to do? How does the discount rate influence his decision? + Drag and drop an image or PDF file or Click to browse... Q2 c (3 points) We've learned two theories of education: human capital and signaling. Economists have estimated fairly large "sheepskin" effects, where wages increase significantly when someone earns a degree. Do you think these Q2 c (3 points) We've learned two theories of education: human capital and signaling. Economists have estimated fairly large "sheepskin" effects, where wages increase significantly when someone earns a degree. Do you think these sheepskin effects are consistent with the human capital theory of education or signaling? Carefully explain. Do you think these theories could both hold some merit in the real world? Carefully explain. + Drag and drop an image or PDF file or click to browse... Q3 a (5 points) The minimum wage in Ontario has increased from $11.70 an hour in 2017 to $14.25 an hour. Some have claimed that this has increased unemployment in Ontario. Could you just look at the unemployment rate in 2017 and compare it to the present? Why or why not? How would you try and test their claim? If you found that minimum wage had no impact on the unemployment rate, does that mean there was no effect of minimum wage on the labour market? + Drag and drop an image or PDF file or click to browse
