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

Assignmentselect and review an inspection report posted on

Assignment Select and review an inspection report posted on the OSHA website. The inspection reports can be searched by industry group or establishment name by accessing the reports through the OSHA's Statistics & Data P ...

Assignmentthe agile approach towards system analysis and

Assignment The agile approach towards system analysis and development emphasizes iterative and incremental development, in which requirements and solutions evolve through collaboration. Prepare a 1000 word essay on the r ...

New jersey human servicesassignment evaluation of the

NEW JERSEY HUMAN SERVICES Assignment: Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provid ...

Q1 in quantity theory of money model mv py assume that v

Q1. In quantity theory of money model, MV = PY, assume that V is constant, M is growing at 6% per year, Y is growing at 3%. a. If r = 2, what is i? b. If the Fed reduces the money growth rate by 2% points per year, what ...

Assignmentyou have been asked to assist your organizations

Assignment You have been asked to assist your organization's marketing department to better understand how consumers make economic decisions. Write a 1,050-word analysis that includes the following: • The impact the theo ...

Assignmentinstructions the topic of the research paper will

Assignment Instructions: The topic of the research paper will be any disease or condition of the body. The paper must include a thorough description of the disease/condition; current statistics of those affected - epidem ...

Project-listen to this video asafter you work on your graph

Project- Listen to this video as/after you work on your graph. The lecture is on the 'Aftermath of the Financial Crisis' given by Ben Bernanke in March 29 th 2012. https://www.c-span.org/video/?305198-1/ben-bernanke-lect ...

The purpose of an assignment is to ensure that the learner

The purpose of an assignment is to ensure that the Learner is able to: - Use methods of enquiry and research in a disciplined field. - Interpret and evaluate text. - Have a sound understanding of key principles and theor ...

Goal construct a case studyresearch paper that examines a

Goal: Construct a case study/research paper that examines a firm in the U.S. from a microeconomic standpoint and provide suggestions based on your findings. Step 1: Choose a firm for your focus. In addition to picking a ...

Assignmentfor this assignment write a paper describing how

Assignment For this assignment, write a paper describing how an analysis of intrusion signatures could be conducted for your project organization. Include the following in your paper: • A description of signature analysi ...

  • 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