! Assume thatyouhave been admitted to two different university educations(A and B). Education A is very advanced and demands a high effort fromyour side in order to get through it. However, if you do graduate you willget (with certainty) a very good job (interesting, stimulating and witha high salary); if you do not graduate from education A, you will haveto settle with an uninteresting job with a low salary. Education B isrelatively simple and everyone graduates who gets admitted and they get"satsifactory" jobs (pretty fun and with a medium salary). Assume thatyour life-time income with the best job (if you graduate from educationA) is YA = $2, 000, 000, the life-time income from the bad job you have tosettle for if you fail to graduate from education A is Ythe life-time income you get from the pretty good job you get if you chooseeducation B is YB = $1, 200, 000. Assume thatto graduate from education A to 50% and that your utility function forlife-time income is: U(Y) = ln Y.$500, 000, andyouestimateyour chances(a) Which education gives the highest expected life-time income?(b) Which education will you choose if you strive to maximize your ex-pected utility? Explain.(c) What level of life-time income that you get from education B, wouldmake you indifferent between A and B? What is the minimum wage-premium that you demand in order to choose education A in frontof B?(d) Assume that there are many students in your situation, i.e., theywant to start education A, but worry that they may fail. Assume

The education system which provides the better job facilities is one where we get maximum amount of…

Assume that you have been admitted to two different university educations (A and B). Education A is very advanced and demands a high effort from your side in order to get through it. However, if you do graduate you will get (with certainty) a very good job (interesting, stimulating and with a high salary); if you do not graduate from education A, you will have to settle with an uninteresting job with a low salary. Education B is relatively simple and everyone graduates who gets admitted and they get "satsifactory" jobs (pretty fun and with a medium salary). Assume that your life-time income with the best job (if you graduate from education A) is YA = $2, 000, 000, the life-time income from the bad job you have to settle for if you fail to graduate from education A is Y = $500, 000, and the life-time income you get from the pretty good job you get if you choose education B is YB = $1, 200, 000. Assume that to graduate from education A to 50% and that your utility function for life-time income is: U(Y) = In Y. you estimate your chances

Assume that you have been admitted to two different university educations (A and B). Education A is very advanced and demands a high effort from your side in order to get through it. However, if you do graduate you will get (with certainty) a very good job (interesting, stimulating and with a high salary); if you do not graduate from education A, you will have to settle with an uninteresting job with a low salary. Education B is relatively simple and everyone graduates who gets admitted and they get "satsifactory" jobs (pretty fun and with a medium salary). Assume that your life-time income with the best job (if you graduate from education A) is YA = $2, 000, 000, the life-time income from the bad job you have to settle for if you fail to graduate from education A is Y = $500, 000, and the life-time income you get from the pretty good job you get if you choose education B is YB = $1, 200, 000. Assume that to graduate from education A to 50% and that your utility function for life-time income is: U(Y) = In Y. you estimate your chances

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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