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11 Dec 2019

3. Catherine is considering going to medical school. If she does, she will spend $80,000 on tuition and books to get a college education (during the first time period), $120,000 on tuition and books to get a medical degree (during the second time period), and her medical degree will earn her $500,000 during the remainder of her work-life (during the third time period). Her time preference for money (her discount rate) is 20 percent.

a. What is Catherine's present value of obtaining a medical degree?

b. Suppose that Catherine is also considering an alternative career path, in which she obtains a college education in the first period (with the same costs as before) and enters the work force immediately as a marketing analyst. She earns $100,000 in the second period and $200,000 in the third period under this option. Will she choose to become a doctor or a marketing analyst? Show your work.

c. If Catherineâs discount rate is 10 percent, will this change her decision? Show your work.

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Related questions

Logan is about to decide which career path to pursue. She has narrowed her options to two
alternatives, mechanical engineer or economist. Assume she lives for two periods. In the rst, she
gets an education. In the second, she works in the labor market. If Logan becomes an economist,
she will spend $12,000 on tuition and 3,000 on books in the rst period and earn $472,000 in
the second period. If she becomes a mechanical engineer, she will spend $37,000 on tuition and
3,000 on books in the rst period and then earn $500,000 in the second period. Assume Logan
must borrow enough money to pay for tuition and books, she can borrow money at a 5% rate per
period and her discount rate is also 5% per period.

What are the direct, and indirect costs of education faced by Logan? Discuss in general and
give her specific costs from this example.

What is the net present value of Logan's earnings as an economist, and as an engineer?

QUESTION 1

Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered

		frictionally unemployed.
		cyclically unemployed.
		a discouraged worker.
		seasonally unemployed.

1 points

QUESTION 2

Discouraged workers

		are counted as unemployed workers when the unemployment rate is calculated.
		would decrease the unemployment rate if they were added to the number of unemployed workers.
		are counted as one-half of a worker in the unemployment statistics.
		would increase unemployment rate if they were added to the number of unemployed workers.

1 points

QUESTION 3

In measuring the unemployment rate, part-time workers are ________ and discouraged workers are ________.

		included as employed; included as unemployed
		excluded; excluded
		excluded; included as unemployed
		included as employed; excluded

1 points

QUESTION 4

Mary has decided that the she does not like Iowa and has decided to quit her job as a medical technician and move to Arizona. Mary's unemployment as she searches for a new job is best classified as

		frictional.
		cyclical.
		structural.
		seasonal.

1 points

QUESTION 5

When a golf caddy in Minnesota (where golf courses close in the winter) is unemployed in December, it is most likely the case that the golf caddy is

		cyclically unemployed during long droughts.
		frictionally unemployed during spring and summer.
		structurally unemployed during spring and summer.
		seasonally unemployed.

1 points

QUESTION 6

After graduating from college, Yunis, age 22, started working for his parent's real estate business as an unpaid assistant. He works 25 hours a week helping manage rental units . In the Current Population Survey, Yunis is considered

		part of the labor force and employed.
		part of the labor force and unemployed.
		a discouraged worker.
		not part of the labor force.

1 points

QUESTION 7

The working-age population includes

		youngsters between the ages of 14 and 16 if they are working at least part time.
		only employed people over the age of 16.
		those in jails and hospitals.
		employed and unemployed people over the age of 16.

1 points

QUESTION 8

Involuntary part-time workers are workers who

		work less than 35 hours but would like to work full time.
		work more than 35 hours but would like to work less than 35 hours.
		work less than 35 hours by choice.
		work have lost their jobs within the last four weeks and are seeking another job.

1 points

QUESTION 9

Frictional unemployment is the result of

		the normal process of jobs being created and destroyed.
		an economic recession.
		people not getting along (having friction) with their employers.
		the economic decline of major industries

1 points

QUESTION 10

Bill just graduated with his degree in economics. Through Career Services he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered

		not in the labor force.
		cyclically unemployed.
		frictionally unemployed.
		structurally unemployed.

1 points

QUESTION 11

Harry works at the video rental store for 20 hours per week. He's asked his boss to allow him to work 40 hours per week, but has been told that business is too slow. Harry is considered

		an involuntary part-time worker.
		a marginally attached worker.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 12

Discouraged workers who are over 16 years old are

i.not counted as unemployed.

ii.part of the working-age population.

iii.part of the labor force.

		i and ii
		ii and iii
		ii only
		i only

1 points

QUESTION 13

Higher unemployment benefits create

		higher seasonal unemployment as workers switch jobs.
		a lower number of job leavers.
		incentives for longer job searches and higher frictional unemployment.
		incentives for shorter job searches and higher structural unemployment.

1 points

QUESTION 14

Seasonal unemployment includes people who become unemployed from

		changes in the business cycle.
		technological changes.
		the seasonal weather patterns.
		normal changes in the labor force.

1 points

QUESTION 15

Cyclical unemployment is

		higher when the economy is expanding.
		always greater than the total of structural and frictional unemployment.
		the total of structural and frictional unemployment.
		created by a recession.

1 points

QUESTION 16

Which of the following people would be classified as employed in the Current Population Survey?

		April, who just graduated from college and is looking for work
		Jason, who was laid off from work less than 6 months ago but who has stopped looking for work
		Rich, who is working 20 hours a week but wants a full-time job
		Misty, who just quit her job to return full time to school

1 points

QUESTION 17

People who are willing and able to work but are not looking for work because they have been discouraged by their previous futile efforts are called

		discouraged workers.
		involuntarily unemployed.
		part-time lookers.
		unemployed workers.

1 points

QUESTION 18

Discouraged workers are included in the calculation of the

i.unemployment rate.

ii.labor force participation rate.

iii.working-age population.

		i and ii
		i only
		iii only
		ii only

1 points

QUESTION 19

As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences

		changes in the business cycle.
		cyclical unemployment.
		frictional unemployment.
		structural unemployment.

1 points

QUESTION 20

Suppose the U.S. population is 275 million. If 210 million people are of working age, 135 million are employed, and 6 million are unemployed, what is the labor force participation rate?

		64 percent
		67 percent
		76 percent
		49 percent

1 points

QUESTION 21

During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________.

		rises; rises
		rises; does not change
		falls; rises
		rises; falls

1 points

QUESTION 22

In January of 2001, the population of the United States was 276.8 million, the working-age population was 210.2 million, the total number of people employed was 140, and the total number of people unemployed was 5.0 million. What was the labor force participation rate?

		56 percent
		69 percent
		78 percent
		67 percent

1 points

QUESTION 23

If Brian, age 24, had no job but was available for work and had looked for a job the week before the survey, Brian is classified in the Current Population Survey as

		unemployed.
		employed.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 24

Julie works part-time for economic reasons. She would be considered

		an involuntary part-time worker.
		not in the labor force.
		a job seeker.
		a discouraged worker.

1 points

QUESTION 25

Suppose the population is 300 million people, the labor force is 200 million people, the number of people employed is 185 million, and the working-age population is 170 million people. What is the unemployment rate?

		5 percent
		7.5 percent
		8.8 percent
		92.5 percent

1 points

QUESTION 1

Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered

		frictionally unemployed.
		cyclically unemployed.
		a discouraged worker.
		seasonally unemployed.

1 points

QUESTION 2

Discouraged workers

		are counted as unemployed workers when the unemployment rate is calculated.
		would decrease the unemployment rate if they were added to the number of unemployed workers.
		are counted as one-half of a worker in the unemployment statistics.
		would increase unemployment rate if they were added to the number of unemployed workers.

1 points

QUESTION 3

In measuring the unemployment rate, part-time workers are ________ and discouraged workers are ________.

		included as employed; included as unemployed
		excluded; excluded
		excluded; included as unemployed
		included as employed; excluded

1 points

QUESTION 4

Mary has decided that the she does not like Iowa and has decided to quit her job as a medical technician and move to Arizona. Mary's unemployment as she searches for a new job is best classified as

		frictional.
		cyclical.
		structural.
		seasonal.

1 points

QUESTION 5

When a golf caddy in Minnesota (where golf courses close in the winter) is unemployed in December, it is most likely the case that the golf caddy is

		cyclically unemployed during long droughts.
		frictionally unemployed during spring and summer.
		structurally unemployed during spring and summer.
		seasonally unemployed.

1 points

QUESTION 6

		part of the labor force and employed.
		part of the labor force and unemployed.
		a discouraged worker.
		not part of the labor force.

1 points

QUESTION 7

The working-age population includes

		youngsters between the ages of 14 and 16 if they are working at least part time.
		only employed people over the age of 16.
		those in jails and hospitals.
		employed and unemployed people over the age of 16.

1 points

QUESTION 8

Involuntary part-time workers are workers who

		work less than 35 hours but would like to work full time.
		work more than 35 hours but would like to work less than 35 hours.
		work less than 35 hours by choice.
		work have lost their jobs within the last four weeks and are seeking another job.

1 points

QUESTION 9

Frictional unemployment is the result of

		the normal process of jobs being created and destroyed.
		an economic recession.
		people not getting along (having friction) with their employers.
		the economic decline of major industries

1 points

QUESTION 10

Bill just graduated with his degree in economics. Through Career Services he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered

		not in the labor force.
		cyclically unemployed.
		frictionally unemployed.
		structurally unemployed.

1 points

QUESTION 11

Harry works at the video rental store for 20 hours per week. He's asked his boss to allow him to work 40 hours per week, but has been told that business is too slow. Harry is considered

		an involuntary part-time worker.
		a marginally attached worker.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 12

Discouraged workers who are over 16 years old are

i.not counted as unemployed.

ii.part of the working-age population.

iii.part of the labor force.

		i and ii
		ii and iii
		ii only
		i only

1 points

QUESTION 13

Higher unemployment benefits create

		higher seasonal unemployment as workers switch jobs.
		a lower number of job leavers.
		incentives for longer job searches and higher frictional unemployment.
		incentives for shorter job searches and higher structural unemployment.

1 points

QUESTION 14

Seasonal unemployment includes people who become unemployed from

		changes in the business cycle.
		technological changes.
		the seasonal weather patterns.
		normal changes in the labor force.

1 points

QUESTION 15

Cyclical unemployment is

		higher when the economy is expanding.
		always greater than the total of structural and frictional unemployment.
		the total of structural and frictional unemployment.
		created by a recession.

1 points

QUESTION 16

Which of the following people would be classified as employed in the Current Population Survey?

		April, who just graduated from college and is looking for work
		Jason, who was laid off from work less than 6 months ago but who has stopped looking for work
		Rich, who is working 20 hours a week but wants a full-time job
		Misty, who just quit her job to return full time to school

1 points

QUESTION 17

People who are willing and able to work but are not looking for work because they have been discouraged by their previous futile efforts are called

		discouraged workers.
		involuntarily unemployed.
		part-time lookers.
		unemployed workers.

1 points

QUESTION 18

Discouraged workers are included in the calculation of the

i.unemployment rate.

ii.labor force participation rate.

iii.working-age population.

		i and ii
		i only
		iii only
		ii only

1 points

QUESTION 19

As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences

		changes in the business cycle.
		cyclical unemployment.
		frictional unemployment.
		structural unemployment.

1 points

QUESTION 20

Suppose the U.S. population is 275 million. If 210 million people are of working age, 135 million are employed, and 6 million are unemployed, what is the labor force participation rate?

		64 percent
		67 percent
		76 percent
		49 percent

1 points

QUESTION 21

During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________.

		rises; rises
		rises; does not change
		falls; rises
		rises; falls

1 points

QUESTION 22

		56 percent
		69 percent
		78 percent
		67 percent

1 points

QUESTION 23

If Brian, age 24, had no job but was available for work and had looked for a job the week before the survey, Brian is classified in the Current Population Survey as

		unemployed.
		employed.
		a discouraged worker.
		not in the labor force.

1 points

QUESTION 24

Julie works part-time for economic reasons. She would be considered

		an involuntary part-time worker.
		not in the labor force.
		a job seeker.
		a discouraged worker.

1 points

QUESTION 25

		5 percent
		7.5 percent
		8.8 percent
		92.5 percent

1 points

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