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The Cost of Obtaining a Four-Year Degree Is $120,000 for Low-Ability

question 35

Essay

The cost of obtaining a four-year degree is $120,000 for low-ability workers and $60,000 for high-ability workers. Suppose that workers without a four-year degree are paid lifetime wages of $500,000. For education to be an effective signal of ability, what range of lifetime earnings must be paid to workers with a four-year degree?


Definitions:

Human Participants

Individuals who take part in research studies or experiments, contributing data through their actions or responses.

Normal Distribution

A bell-shaped curve that represents the distribution of many types of data where most values cluster around the mean.

Scores

Quantitative measures or figures used to represent someone's ability, achievement, or performance in various tests or competitions.

Mean

The arithmetic average of a set of numbers, calculated by adding them together and dividing by the total number of values.

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