Suppose That the Costs of Going to College Are Given

question 33

Essay

Suppose that the costs of going to college are given by:
Low-ability person: C = $60,000y
High-ability person: C = $30,000y
where y is years in college. There are two types of workers, those with high ability and those with low ability. Employers cannot distinguish between them, so they pay each worker $250,000, the average value of output per worker. Employers will pay workers $380,000 if they earn a four-year degree.
a. Will high-ability workers choose to get a four-year degree? What about low-ability workers?
b. Because of rampant grade inflation, the cost of going to college for a low-ability person falls to C = 32,000y. Will low-ability workers choose to get a four-year degree? Does going to college serve as an effective signal?

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Definitions:

Proteoglycans

Proteoglycans are large molecules found in the extracellular matrix of cells, consisting of a core protein and glycosaminoglycan (GAG) chains, important for cell signaling and structuring.

Connective Tissue

A type of tissue that supports, connects, or separates different types of tissues and organs in the body, with diverse functions including providing structural support and storing energy.

Mast Cell

A type of white blood cell found in connective tissue that plays a significant role in allergic reactions and inflammation by releasing histamine and other chemicals.

Inflammation

A protective response by the body's immune system to injury, infection, or irritation, characterized by redness, heat, swelling, and pain.