Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

problem 1.

You are considering whether or not to go to graduate school. Well… there are many things to consider, of course, likethe type of job you would thus get, the opportunity to live in a city or town whose existence you might have disregarded entirely otherwise and, most importantly, the sheer and ecstatic joy of learning! (By now, you might be wondering what I am on and where you can get some – search no further than Durian, a pungent fruit available in Chinatowns across NYC). All right, all this is well and good, but there is also a monetary aspect… Financially, will it be a sound decision? Let’s see.

For the purposes of this exercise, we would suppose there is no inflation.

• The graduate program you are looking at lasts four years;

• The school forbids you to work during the time of program (to leave all your time to studying), but they would give you 10 000$ a year to live on

• The program will allow you to get a job paying 70 000 a year when you get out.

• If you do not go to graduate school (suppose you are just graduating from college), you have a job lined up paying 45 000.

• Your discount rate is 10% (0.1).

a) Is this a good idea financially? That is, does the higher wage when you get out ever compensates for the lower income during grad school? If so, how many years should you work on the job after graduation in order to come up ahead? (don’t forget to discount the future!)

b) What if you have another option: A school which lends you the money, but promises a job at 90 000$ when you get out. Let’s say that the school lends you the 10000$ a year instead, and that repayment is due whenever you want (say, within 20 years), but as soon as you graduate, the loan starts accruing interest at a rate of 10% a year (so you owe 40 000$ on the day of graduation, 44 000$ the next year if you don’t pay anything, etc.). In this case, how many years do you need at 90 000$ for you to come out ahead? If you do come start coming out ahead after a while, do you do so faster than at the free school?

c) We talked to some extent about the issue of debt peonage in class. Even if you come out ahead eventually with the deal in b), is it constraining in away in terms of life plans? If so how?

d) So far, I have assumed that you have all the information (job-wise, etc.) in advance and that you know the information for certain. Of course, life is not so simple and no job is ever entirely guaranteed… So in this case, on what would you base your decision (keeping it on financial considerations for now)? How solid of a basis do you feel this is? Does taking uncertainty into account change the assessment of whether you should take a loan to study or not? If so, how does it change it?

problem 2.

This is partly taken from a court case where one of my colleagues was a witness. Suppose that an employee is terminated without cause and that she sues the company for compensation.

• Her wage used to be 20 000$ a year at the time of termination, and was set to grow at 5% a year.

• Suppose we use the rate of interest as the discount rate, at 3%.

• She still had 8 years to work there, before retirement.

• They gave her severance pay of 5000$

• At retirement, she would have been owed a pension equal to the best year in terms of pay (here, the last year, since the salary grows every year – so, for this one, use the wage rate you find out at the end of the 8 year period). Let’s assume she would have been projected to receive the pension for 10 years (note that the pension level does not increase at all any of these years)

a) How much should the company compensate her, assuming that they are found to be at fault?
Here again, outline all the steps of your reasoning.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91935

Have any Question? 


Related Questions in Microeconomics

Economic term paperempirical project the research project

Economic Term Paper Empirical Project The research project should be about 10 pages and should explain your data collection, model, and findings. The project (due by the final exam date) is worth 30% of your final grade. ...

Discussion questionsi need 3 different discussion to be

Discussion Questions I need 3 different Discussion to be answered, by replying to what the student wrote. I'll forward the Discussions as we agree to shake hands. Word counts asnwer question no more than 100 words if mor ...

Implicit and explicit costs economic problemsproblem achoco

Implicit and Explicit Costs: Economic Problems Problem A Choco Delite is a manufacturer of fine chocolates. Its monthly rental expense is $1,000,000. It also has $2 million in fixed labor costs. Its marginal costs are $. ...

Assignmentreview the cba provided in the resources section

Assignment Review the CBA provided in the resources section between the Trustees of Columbia University and Local 2110 International Union of Technical, Office, and Professional Workers. Describe how this is similar to a ...

Watch the video on the link belowthen answer the following

Watch the video on the link below. Then answer the following questions: 1. Would the incentives discussed in the video be able to work in a college setting? Why or why not? 2. Have you ever changed your behavior because ...

Assignment discussion-applying balanced scorecardin many

Assignment: Discussion-Applying Balanced Scorecard In many cases, managers end up in trouble as they direct their focus exclusively on cost savings. Cost cutting is always emphasized, but other impacts, such as decreased ...

Questionsexercisesseminar 11nbsp discuss what you

Questions/Exercises Seminar 1 1.  Discuss what you understand by the following: a) the law of demand b) the conditions of demand c) a demand curve d) a normal good e) an inferior good f) a Giffen good G) the law of suppl ...

Meqa assignment 2its been three weeks since you started

MEQA Assignment 2 It's been three weeks since you started working for BioMed and there's still no trace of Selwyn. That means you're still BioMed's resident economic expert. Harry the CEO was pleased with your earlier wo ...

Assignmentwhat are the two distinguishing properties of a

Assignment What are the two distinguishing properties of a public good? Explain each in one or two sentences. Give an example of a public good different from any of the examples in your text or my notes. What is the "fre ...

Assignmentwe often have difficulty understanding how our

Assignment We often have difficulty understanding how our own customs and traditions could be viewed any way other than as right. In that regard, cultural relativism (viewing a custom from the other culture's perspective ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro