(Answered) Consider an infinitely-lived individual who chooses years

Economics

Consider an infinitely-lived individual who chooses years of schooling s to maximize the present-discounted value of her lifetime income. once her schooling ends, her income at each moment in time is y(s) and remains constant for the remainder of her lifetime. she discounts the future at the rate r

(a) Drive the optimal stopping rule for investment in education for the individual's problem:

max integral sign, upper limit=infinity and lower limit=s y(s)e^(-rt) dt

(b) suppose you know that the income-schooling locus natural log terms is given by: In(y(s))=8+0.8In(s). what can you infer about the discount rate r of a worker with 16 years of education?

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