Ñ4 Suppose that the wage of the worker withthe schooling level S and ability A is givenby w(A,S) = AVS. Every period of schoolingthe worker has to pay tuition F. Governmentsubsidizes M of her tuition.If ability of worker is A = 2, the marketinterest rate is r = 0.02 the tuition is F = 8,and the government pays M = 3 of thetuition, what is the optimal level ofschooling for this worker.Suppose the worker is uncertain about thewage she might receive after thegraduation. With the probability 0.4 sheexpects the wage to be wL(A,S) = 0.5AVS,with probability 0.5 she expects the wageto be wM (A,S) = AVS, and with probability0.1 she expects the wage to be wH(A,S) =3AVS. If the workers is risk-neutral, what isher optimal level of schooling? (useparameters from 2.1.)

Optimal Schooling Level is defined as the situation which occurs when the marginal benefit of…

Suppose that the wage of the worker with the schooling level S and ability A is given by w(A,S) = A√S. Every period of schooling the worker has to pay tuition F. Government subsidizes M of her tuition. If ability of worker is A = 2, the market interest rate is r = 0.02 the tuition is F = 8, and the government pays M = 3 of the