Person should choose schooling such that the marginal rate of return equals the discount rate ....

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Person should choose schooling such that the marginal rate of return equals the discount rate . Suppose the discount rate is r but the person stops schooling at s' and starts working for wage w'. If person had obtained an extra year of school he would have forgone income w' and would have paid H/ out-of-pocket expenditures. The alternative is to take that w' + H' and deposit it in a bank account that would pay an interest rate of r which is lower than r', the return of the extra year of schooling. Is going to college a good idea? Person should choose schooling such that the marginal rate of return equals the discount rate . Suppose the discount rate is r but the person stops schooling at s' and starts working for wage w'. If person had obtained an extra year of school he would have forgone income w' and would have paid H/ out-of-pocket expenditures. The alternative is to take that w' + H' and deposit it in a bank account that would pay an interest rate of r which is lower than r', the return of the extra year of schooling. Is going to college a good idea?

Answer rating: 100% (QA)

ANSWER Based on the information provided it seems that the person has not chosen the optimal level o... View the full answer