Question

8. "Experience squared" enters into the Mincer Earnings function with a negative coefficient because

a. Earnings will fall to zero after age 65.

b. Earnings increase linearly with experience.

c. Earnings increase at a decreasing rate at experience rises.

d. Earnings fall as experience rises.

9. Juanita is a high school graduate, considering going to law school. If she does, she will spend $60,000 on tuition and books to get a college education (during the first time period), $120,000 on tuition and books to get a law degree (during the second time period), and her law degree will earn her $1,000,000 more during the remainder of her work-life, relative to a high school graduate (during the third time period). Juanita's time preference for money is associated with a per-period interest rate of 20 percent. Approximately what is Juanita's present value of obtaining a law degree?

a. $1,000,000

b. $445,370

c. $820,000

d. $712,037

10. What is the present value of $1000 received 10 years from now, if the interest rate is 5%?

a. $1000

b. $614

c. $952

d. $20,000

11. Why might people choose to go to college?

a. Because a college education signals to firms that the worker is highly motivated.

b. Because a college education increases one's productivity, which will be rewarded in the labor market with higher wages.

c. Because one cannot find employment.

d. All of the above.