The following story is the starting point for all the questions in this quiz: In this question you will consider the potential human capital decision that Bob, a recent high school graduate, can make. Including today as period 1, Bob will live for 3 periods. He has narrowed down his education and career plans to 2 options.

1.Bob can start working right now, in which case he will earn $100,000 in period 1, $120,000 in period 2 as he gains more experience, and $100,000 in period 3 as his skills start to become obsolete.

2.Bob can attend college right now in period 1, in which case he pays an out-of-pocket cost of $30,000 today. Then, in periods 2 he will earn $200,000 and in period 3 he will earn $200,000. Assume that Bob does not care at all about the experience of going to college. The only benefits he receives from going to college are his higher wages in periods 2 and

3.

Bob's discount rate in all 3 periods is 20%.

Q1 Recall that we stated in class that the costs of college are both out-of-pocket costs and also opportunity costs. What is Bob's total cost of going to college?

Q2In class, we mentioned that the benefit for a person of acquiring an education is the additional income that the person earns over a lifetimecompared to what they would earn if they did not acquire the education. How much additional income will Bob earn in period 2 if he goes to college?

Q3How much additional income will Bob earn in period 3 if he goes to college?

Q4We can consider the benefits that Bob will earn from going to college as the additional income he will earn in period 2, and the additional income he will earn in period 3. But, these benefits come in the future. Note that period 2 is one period in the future, and period 3 is two periods in the future. What is Bob's present value for the benefits of going to college?

Q5Will Bob go to college, or go straight to work?

Group of answer choices

A. Bob will go to college.

B. Bob will go straight to work.