Suppose That Many Consumers Tend to Over-State the Discount Rate

question 134

Multiple Choice

Suppose that many consumers tend to over-state the discount rate that should be used for computing the net present value of education, just as they do when making investments in durable goods like cars and appliances. What would happen if consumers (as a group) started to use lower discount rates when making decisions about their education?

• A) NPV of a degree declines, demand for education declines
• B) NPV of a degree declines, demand for education increases
• C) NPV of a degree increases, demand for education declines
• D) NPV of a degree increases, demand for education increases

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