Use the Grossman model to answer the following questions. a) Sara is an 18-year-old high school...
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Use the Grossman model to answer the following questions. a) Sara is an 18-year-old high school graduate and earning a wage of $10 per hour. Depict her optimal health stock with the marginal efficiency of invest (MEI) curve. b) Suppose that she invests in a college education, expecting to get a better and higher-wage job. Show how her optimal stock of health capital changes by the age of 30 due to the increased wage. Then, show how her education would affect her optimal health stock if education also makes her a more efficient producer of health. c) Suppose that after age 30 her wage stays the same. As she ages, show what happens to her optimal stock of health capital, assuming that the depreciation rate of health increases with age. Use the Grossman model to answer the following questions. a) Sara is an 18-year-old high school graduate and earning a wage of $10 per hour. Depict her optimal health stock with the marginal efficiency of invest (MEI) curve. b) Suppose that she invests in a college education, expecting to get a better and higher-wage job. Show how her optimal stock of health capital changes by the age of 30 due to the increased wage. Then, show how her education would affect her optimal health stock if education also makes her a more efficient producer of health. c) Suppose that after age 30 her wage stays the same. As she ages, show what happens to her optimal stock of health capital, assuming that the depreciation rate of health increases with age.
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