A low-skill worker in the U.S. might expect to earn $600k in a lifetime. Going to 3 year college would cost him $70,000 in tuition and living expenses and $30,000 in forgone earnings. People graduating from college have a 70% chance of earning $2M in a lifetime and a 30% chance of earning $600k (ie, the same as the low skilled wage.) 6. What is the expected value of an investment in education in the US? 7. Assuming risk aversion, show the average person's expected utility in from investing in education in an equation, and with a suitably labelled graph. Compare to the utility from not educating.

A low-skill worker in the U.S. might expect to earn $600k in a lifetime. Going to 3 year college would cost him $70,000 in tuition and living expenses and $30,000 in forgone earnings. People graduating from college have a 70% chance of earning $2M in a lifetime and a 30% chance of earning $600k (ie, the same as the low skilled wage.) 6. What is the expected value of an investment in education in the US? 7. Assuming risk aversion, show the average person's expected utility in from investing in education in an equation, and with a suitably labelled graph. Compare to the utility from not educating.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.3P

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