Suppose that all people have identical tastes and identical talents, but that those who attend college become more productive and hence earn higher wages. On the other hand, college students have to pay tuition.
a. Explain why college graduates and non-graduates must be equally happy. Use this observation and an indifference curve diagram to illustrate the equilibrium tuition cost.
b. True or False: Because college graduates earn higher wages, they might choose to work fewer hours than non-graduates.