Relation between the years of schooling and the annual earnings
Andre's wage-schooling locus can be described by the following table
Years of Schooling Annual Earnings
(a) Depict the wage-schooling locus on a graph.
(b) Derive the marginal rate of return to schooling curve. Depict on a graph as completely as possible.
(c) Would this person finish the 12th grade if their discount rate was 15%? describe.
(d) Would this person finish the 16th grade if their discount rate was 3%? describe.
(e) How would either decision change if the government imposed a 20% tax on earnings and interest income?
(f) What would happen if the government exempted interest income?