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:

Bond Discount

The difference between the face value of a bond and the price for which it sells when the selling price is lower than its face value.

Indirect Method

A cash flow statement technique that starts with net income and adjusts for changes in balance sheet accounts to arrive at operating cash flow.

Capital Expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.

Operating Expenses

The ongoing costs for running a business that are not directly tied to the production of goods or services, such as rent, utilities, and salaries.