The Costs of Obtaining a College Degree for High-Productivity and Low-Productivity

question 20

Multiple Choice

The costs of obtaining a college degree for high-productivity and low-productivity workers are as follows:
High productivity: C_H = $120,000
Low productivity: C_L = $180,000
Suppose workers with a college degree are paid a lifetime income of $400,000 and workers without a college degree are paid $230,000. Which of the following statements is (are) TRUE?

• A) Both high- and low-productivity workers choose to get a college degree.
• B) Neither high- nor low-productivity workers choose to get a college degree.
• C) The net lifetime income of high-productivity workers increases by $50,000 because of their college degree.
• D) Low-productivity workers are better off getting a college degree.

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Definitions:

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

Target Costing

A pricing method that involves determining a product's selling price and then subtracting desired profit to arrive at a target production cost.

Target Costing

A pricing strategy where the selling price of a product is determined first, and then the manufacturing cost is managed to meet that target price.

Price Control

Government or company policies aimed at regulating or setting prices for goods and services in a market.