There Are Two Major Theories of Why Education Leads to Higher

question 37

Multiple Choice

There are two major theories of why education leads to higher earnings (though they are not mutually exclusive) : signaling and the building of labor market issues. If the signaling theory is dominant, how would the average wage for college graduates change if everyone received a college degree?

• A) It would increase because the marginal product of labor would increase.
• B) It would increase because more people would be identified as hard working.
• C) It would decrease because it would be more difficult to differentiate workers.
• D) It would decrease because most of what you learn in college does not make you more productive.

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Definitions:

Resource Consumption

The amount of resources used up in the production of goods or services.

Activity-Based Costing

An accounting methodology that assigns costs to products or services based on the activities and resources that contribute to their production.

Activity Cost Pools

Groupings of individual costs associated with particular activities, used in activity-based costing to allocate costs more accurately.

Machining Activity Pool

A collection of all costs related to machining operations, used in activity-based costing to allocate costs based on actual usage.