a. If people base their education decisions only on the marginal private benefit of education, how many years of education will they choose to get? b. What is the socially optimum number of years of education people should get? c. If the government decides to provide a subsidy to every student in order to encourage them to get the socially optimal number of years of education, how much, per year, does this subsidy have to be? /

a. If people base their education decisions only on the marginal private benefit of education, how many years of education will they choose to get? b. What is the socially optimum number of years of education people should get? c. If the government decides to provide a subsidy to every student in order to encourage them to get the socially optimal number of years of education, how much, per year, does this subsidy have to be? /

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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Suppose the administration of a University that is located a high-crime urban area mustdecide on a policy to increase policing on its campus. The student population is 10,500 students but iscould increase if crime is reduced. The cost of added policing in terms of additional salary and equipmentis estimated to be $2.4 million per year. Suppose the administration plans to make their decision with thehelp of a benefit cost analysis of the policy. VSL is $11.8 million a. Explain how the concept of Value of a Statistical Life might factor into a benefit cost analysis of thispolicy. b. How many lives would need to be save to justify the added policing costs if only prevented deathswere considered as the policy benefit? c. Suppose it is believed that student enrollment will increase in the future if crime on campus is reduced.Write a formula to calculate the present value of benefits of policing if student enrollment increases by4% each year.
Review the numbers for Canada and Venezuelafrom Table 33.12 which describes how many barrelsof oil and tons of lumber the workers can produce. Usethese numbers to answer the rest of this question.a. Draw a production possibilities frontier for eachcountry. Assume there are 100 workers in eachcountry. Canadians and Venezuelans desire bothoil and lumber. Canadians want at least 2,000tons of lumber. Mark a point on their productionpossibilities where they can get at least 3,000tons.b. Assume that the Canadians specializecompletely because they figured out they havea comparative advantage in lumber. They arewilling to give up 1,000 tons of lumber. Howmuch oil should they ask for in return for thislumber to be as well off as they were with notrade? How much should they ask for if theywant to gain from trading with Venezuela? Note:We can think of this “ask” as the relative price ortrade price of lumber.c. Is the Canadian “ask” you identified in (b) alsobeneficial for Venezuelans? Use the…
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The government of the island nation of Autarka has become increasingly concerned aboutthe health and wellbeing of low income households. Medical experts stress the importanceof a healthy diet in this regard. They have determined that, ideally, a household wouldconsume at least 5kg of fresh fruit and vegetables each week.The government has proposed implementing a new voucher scheme to ensure that the5kg per week consumption target is met. Under the government’s proposal, the voucherswould be redeemable for fresh fruit and vegetables, but could not be used for other typesof food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme,the value of the vouchers sent to a household would be linked to the household’s income.Community groups in Autarka have expressed concern that a voucher scheme is unnec-essarily paternalistic; depriving low income households of the choice of how to spend theirincome. These groups argue that the government’s consumption targets could…
Table: Utility for Terri and Mary Income Terri'sMarginal Utilityfrom Income Maty'sMarginal Utilityfrom Income $0 $100 14 11 $200 11 7 $300 6 6 $400 4 5 $500 2 4 Reference: Ref 20-3 Table: Utility for Terri and Mary (Table: Utility for Terri and Mary) Use Table: Utility for Terri and Mary. Each has an income of $300. _____ is more risk-averse because _____ has a _____ drop in total utility if income were to fall by $100. Select one: a. Terri; Terri; larger b. Terri; Mary; larger c. Mary; Terri; smaller d. Mary; Mary; larger