Suppose you are choosing a career path with two options: Either you study at university before entering the labour market, or you enter the labour market directly. You only live for two periods. If you study, you incur tuition fees of £10,000 in the first period, but earn £100,000 in the second. If you enter the labor market directly, you earn £10,000 in the first period and £75,000 in the second. a) What is the discount rate that makes you monetarily indifferent between studying and entering the labor market directly? Explain your reasoning.

Suppose you are choosing a career path with two options: Either you study at university before entering the labour market, or you enter the labour market directly. You only live for two periods. If you study, you incur tuition fees of £10,000 in the first period, but earn £100,000 in the second. If you enter the labor market directly, you earn £10,000 in the first period and £75,000 in the second. a) What is the discount rate that makes you monetarily indifferent between studying and entering the labor market directly? Explain your reasoning.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter19: Labor And Entrepreneurship: The Human Inputs

Section: Chapter Questions

Problem 14DQ

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