Suppose that a program is implemented which guarantees college tuition assistance to students maintaining a minimum GPA standard.

1.Assuming that education increases individual productivity (and workersarepaid their marginal revenue product), use a basic model of human capital investment to predict the effect of this program on average educational attainment and earnings.

2.Suppose that a college education does not actually increase individual productivity, but is the optimal signal of inherently high productivity. Using a clearly labeled diagram that illustrates the signaling model of education, explain how college education could be a perfect signal of high productivity and thus be worth it for employers to pay a higher wage to college graduates

3.Continuing to assume that education does not increase productivity, but only signals inherently high productivity, illustrate the effect of the tuition assistance program described in 1 if only the high productivity individuals can maintain the GPA standard and take advantage of the program? Use this model to predict the effect of the program on average educational attainment and earnings.

4.Suppose that pressures to ensure eligibility for the program leads to grade inflation. As a result, both high and low productivity individuals can qualify for the tuition assistance program described in 1. Use the signaling model to illustrate the effect of the program. What changes, if any, would need to take place toensurethat employers could still perfectly identify high productivity workers?