RETURNS TO EDUCATIONAL INVESTMENTS Consider the household problem defined in class. . Household payoff ; defined over consumption today c, and tomorrow . mi = log(c) + log(ci) . Household lifetime budget constraint C Wh - WI 1+r 1+r 1+r Where household i: . Has income yi . Makes the decision to send children to "school" based on costs and differences in earnings - wh after going to school (e, = 1) - wj if not (e; = 0) . :, household specific cost for schooling . r, interest rate on savings/borrowing (given) Q1. Show that the household's decision to invest in education is independent of the run- tional form imposed on the household payoff function. Show all of vour work. and iden- tify / distinguish . the lifetime budget constraint with no schooling . the net present value of a future college wage premium . The maximum level or condition on 0, that would support the decision to invest in schooling. Q2. Define in words (1 paragraph) the cost of schooling, 0;. Discuss costs in terms of economic costs. sticker prices, and student loan debt. Then, describe in words (1 paragraph) why 0; will vary by household. In the debt discussion be sure to mention wealth and the interest rate paid for borrowing. Summarize the tradeoffs households face doing your best to use the context of the entire assignment